My two bits on MSME’s and COVID

The coronavirus pandemic has brought the world to a standstill. The worst affected segment in this crisis unarguably the micro small and medium enterprises (MSMEs).With businesses shut off and fixed cost dangling over them, SMEs and MSMEs are unable to handle the situation. While for the MSME sector, the shocks and surprises are not new, particularly after demonetisation and implementation of GST policy, but COVID-19 has nonetheless brought a unique predicament in the lives of entrepreneurs of the small and medium businesses.

When we think of COVID -19, there are more questions and unknowns than there are known’s and answers. Many MSMEs might close down as these enterprises are very fragile. They don’t have the resilience of a larger company and are therefore greatest at risk. So if this thing drags on for a long time, and we don’t do enough to throw a lifeline on them, keep them alive and then help them adapt, more than half of them might die and not recover. This could be a catastrophe for us.

Having spoken to entrepreneurs across different sectors from North East India, a comprehensive understanding of the kind of issues they are facing has emerged.

The number issue for all of them is cash. Their revenues have gone zero, their vendors have stopped paying them and receivables are completely frozen. Even when the lockdown is removed, the recovery is not going to be overnight. The need of the hour is to have a SME stabilisation fund. Entrepreneurs also need to figure out what the world needs and not what they used to produce. The MSMEs have to come together around industry associations. One of the reasons why the IT industry has been so successful is because they have organised NASSCOM. The crisis is also a giant opportunity. Entrepreneurs can strategise and find new ways of doing business. Those who can survive in the medium term and adapt are going to flourish.

1 comment

  1. Agreed. Sriparna, Very well thought of and expressed. We need to brainstorm fast and xarry out a SWOT analysis..

    Just to supplement..a few thoughts which has come to my mind…

    I for myself believe that we need Indian Solutions to Indian Problems.

    As a micro economy analyst I feel we need to revisit, redifine and redesign the Micro Sector.Take it out of the MSME nomenclatures. Simplify cimpliance norms and documentation formalities.

    The Micro Sector will have to be brought to the Organized Sector. Daily Wage Earners suddenly has attracted lot of attention. Even after so many decades of independence we still have daily wage earners. The micro sector will have to move from ‘Subsistence’ to Commercial activity.

    Village network economy is needed to be promoted so that there is proper network between producers and consumers, say within a network of 20 villages so that Wealth of these 20 villages remain within themselves and the only the surplus of produce goes outside. Revenue thus earned will further add to the Wealth of these 20 villages.
    We must not overlook the fact that fortune lies at the bottom of the pyramid. Average 80% population un the Country stays in the villages. The multi national corporate has seen the oppurtunities in our villages. We are not seeing. We are overlooking and they are looking into.
    Unfortunately our education is displacing the human resources from the villages to the megapolis. The education, in the days to come,must empower our Youths in the villages to remain in the villages come outwith new ideas, innovate and create opportunities not only for themselves but for the Nation as a whole in the true spirit of Inclusive Growth of the Economy.

    Agriculture based industries, Cottage Industries, Ayurveda based industries, Handlooms & Handicrafts as illustrations is needed to be encouraged. Cooperatives with added value, financial discipline will have a greater role to play.Production for the ‘needs’ of the masses by the masses is to be encouraged.

    The banking industry at the operating branch level must become more proactive rather than remaining reactive in extending need based finance with flexibility of schemes customized to meet local priorities.

    Greater Industry-Academic interface has to be there, for smoother ‘Transfer of Technology’ and ‘Lab to Land’ endeavours.

    I hope I am making some sense. I value your opinion.

    Best Wishes. Stay Safe and Stay Blessed.

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