A recent survey has revealed that 2.5-3 crore jobs were lost in Micro, Small and Medium Enterprises (MSMEs) in India by June end due to the coronavirus pandemic. Another 1-1.5 crore jobs might be lost in the coming months due to the financial crunch going on in the sector.
The survey was conducted jointly by Federation of Indian Micro, Small and Medium Enterprises (FISME), SKOCH Group, Bhartiya Vitta Salahkar Samiti (BVSS), and Tax Law Educare Society (TALES).
It was the third national multi-institutional survey of 2020. According to the survey, 61 percent of the MSMEs are not in a condition to service their debts in September when the moratorium period ends. The moratorium period ends in August. The survey reveals that around 32 percent of the MSME owners want the moratorium period to be extended by one year. Though, the number is better than the data of April which had 37 percent people with the same demand. Yet, the data shows that there are going to be large Non Performing Assets (NPAs).
This indicates that the whole moratorium structure needs to be reframed. The Aatma Nirbhar Package launched by the government to provide a credit of 3 lakh crore has kick started the liquidity in the market, but it is not sufficient for the grievance of MSME sector. It fulfills only 19 percent of the credit demand in the sector.
The induced liquidity in the market has shown some green shoots of revival. It further reveals that 37 percent of employers are in favour of a 50 percent salary cut in the coming months to cope with the market. The number was as high as 42 percent in April. Though, a major factor for losses for these companies is long due payment form government. Often the payment from government’s side takes 90-180 days before getting cleared.
The survey suggests a National Rural Employment Guarantee Scheme like structure for urban areas to ensure income security for employees of MSMEs. As a surprising revelation, the survey says that 42 percent of the MSME owners believe that reduced import from China is not going to help their business.