When Prime Minister Narendra Modi appeared on television screens on the afternoon of March 27 to announce the anti-satellite weapon test, owners of small businesses and traders in the city briefly froze, fearing an announcement similar to that of demonetisation that threw life out of gear.
Almost two-and-a-half years after demonetisation and less than two years since the roll-out of the Goods and Services Tax, small businesses in West Bengal are still struggling to recover from the impact of the dual “blows”.
In any State, the micro, small and medium enterprise (MSME) sector is one of the most vibrant and important segments of the economy.
This is particularly true for this eastern State, where the flight of capital since the 1970s resulted in a drought of big-ticket industrial investment.
Lifeblood of economy
The State’s MSME sector is the biggest creator of jobs after agriculture, providing work to more than 135.5 lakh people. West Bengal has more than 88.7 lakh MSMEs, official statistics show. Of these, 99% are micro units with investments of ₹25 lakh.
“The impact of demonetisation was huge,” said Anupam Baral, proprietor of Geetanjali Enterprises, and Secretary, Federation of Cottage and Small Industries, West Bengal. He said that as cash was sucked out of the system, it was the common man and the small businesses who bore the brunt.
Replying to questions on the impact of demonetisation and the introduction of GST on the MSME sector, Union Minister of State for MSMEs Giriraj Singh had told Parliament that the Ministry did not maintain data on the closure of MSMEs or job losses due to these factors.
On the ground, industry representatives said the impact of the two measures had hastened, if not directly triggered, business closures.
“I know of at least five closures,” said Mr. Baral. “These were not solely due to these factors... but they certainly hastened the process,” he remarked, adding that there were now fewer small units around his own renewable energy business at the Kasba Industrial Estate on the city’s eastern fringes.
Acknowledging that both demonetisation and GST had affected MSMEs, especially in the sector’s lower rungs where the impact of a shortage of working capital was most acute, CKC Aromas’ Rishab Kothari said that with GST the problem was more one of implementation and “the devil is always in the detail”.
“West Bengal had the opportunity of becoming an important hub for the agarbatti industry — mostly in the cottage sector — however delays in getting input tax credit under GST is blocking their working capital leading to higher borrowings,” said Mr. Kothari. “An agarbatti cluster set up by the West Bengal government is now lying vacant,” he added.
Mr. Kothari, who also heads the Merchants Chamber of Commerce’s MSME committee, said the State government, however, had played a proactive role in facilitating entrepreneurship and resolving issues for MSMEs.
For MSME owners and workers in this key sector, any party which makes credible promises to improve the policy environment for ensuring business stability is likely to win serious consideration at the polling booth.
