India currently has over 75 million MSMEs (Micro, Small & Medium Enterprises) and close to a quarter of these firms will face closure if the lockdown, induced by Covid-19, goes beyond four weeks while a staggering 43% will shut shop if the panic extends beyond eight weeks, as per a study commissioned by the All India Manufacturer’s Organisation (AIMO).
AIMO on Monday made an urgent plea to the Centre to look into the needs of the MSME sector in the context of the pandemic.
K.E.Raghunathan, past president, AIMO who conducted the study, said, “more livelihoods would be lost than lives due to COVID-19. Based on ground impact information gathered from various sources, AIMO believes that a large number of MSMEs in the country will vanish if the panic continued beyond a month.”
MSMEs, that are the back bone of the Indian economy and provide employment to over 114 million people and contribute to more than 30% of the GDP, have gone through most difficult times in the last three years, as per an AIMO statement.
“It is a known fact, that they faced one setback after another, first being demonetisation then followed by glitchy GST implementation, then came economic slowdown of real estate and auto sector to which most of the MSMEs were main sources of suppliers. Then came the financial and banking crisis. Now, COVID-19 which seems to be the final blow to the MSMEs,” added Mr. Raghunathan.
Signs of decline are already visible. MSMEs have already started facing huge financial burden of unpaid salaries (will eventually result in loss of employment), unpaid EMIs ( will impact the balance sheets of financial institutions) and finally, closure of such operations. Loss-making balance sheets does not allow them to get any finance from banks or NBFCs as per RBI norms, resulting in increased unsold inventory pile-up and getting into dead investments and result in huge losses. These and many more issues such as lack of availability of raw materials from China etc. are all leading towards the eventual shutdown, AIMO further said.