Some MSMEs in Karnataka show signs of recovery

Auto sector rings in slight recovery, bringing positivity to ancillary units

October 28, 2020 02:42 am | Updated 02:42 am IST - Bengaluru

Most automobile firms are back on track and the supply chain also got a great boost as the demand for parts and spares has started coming in.

Most automobile firms are back on track and the supply chain also got a great boost as the demand for parts and spares has started coming in.

The auto ancillary and supply chain industries in Karnataka have started showing signs of recovery with the sales numbers of passenger cars, commercial vehicles, two wheelers and bicycles picking up in the last two months.

The State has over six lakh medium, small and micro enterprises, and the entire MSME sector has been reeling from the slowdown triggered the pandemic.

T.R. Parasuraman, president, BCIC, and president and all-time director of Toyota Industries Engine India, said, “The worst is getting over, especially for the automotive segment. Volumes are picking up and there is demand in local markets, while exports are also slowly happening.”

Most automobile firms are back on track and the supply chain also got a boost to a great extent as the demand for parts and spares started coming in. Some companies are working in multiple shifts to deliver their orders, he said. “Pockets of worries and minor aberrations are there, such as the U.S. elections and a second wave of COVID-19 in Europe. However, the overall panic has settled down, and the fear psychosis is over in India,” he said.

D.R. Subramanyam, CII Karnataka State Council Member and MD of SLN Technologies, said the military side of defence and aerospace have not been impacted much by COVID-19. However, civil aerospace has been affected badly and it will take two years to recover. “In fact, aircraft manufacturers have cut production by 40% and recovery may happen only by 2024 depending on how many people will resume travel,” he added.

Many trade bodies are in the process of studying the impact of the pandemic on their member companies, and no proper quantification has been arrived at yet.

“While a definite financial loss figure is difficult to quantify, it can still be safely assumed that the loss in industrial output may run into tens of thousands of crores in the State keeping in mind the MSMEs (manufacturing) account for nearly 10% of GDP,” said K.B. Arasappa, president, Kassia. “Assuming manufacturing SMEs employ about three million workers in Karnataka, a 10% attrition due to COVID-19 means a loss of 3 lakh jobs attributable to the pandemic.”

It has been conservatively estimated that only 60-70% of normal production has been restored after six months in the badly affected segments. About 15% industries in the most vulnerable micro enterprises segment may have permanently shut shop unable to recover from the shock. The output loss, year on year, for the period, could be as high as 30% in those badly affected segments of MSMEs, as per data provided by Kassia.

M.C. Dinesh, former president, FKCCI, and entrepreneur, said the government has to make all efforts to generate demand in the market. It has to announce infrastructure projects and spend on infrastructure to stimulate the economy. “The government also has to effectively address the needs of the MSMEs and kiranas that are an integral part of daily life,” he added.

According to FKCCI president Perikal Sundar, the pandemic has triggered some start-up activities in the State. “Sheep and goat-rearing has increased 25-30% compared to pre-COVID-19 period. Our youth deserve commendation for initiating new start-ups by taking the pandemic as an opportunity. Many youngsters have also started business ventures around farming and agriculture.''

Most trade bodies felt, the first-time MSME borrowers in the state could not benefit from the government’s ₹3 lakh crore relief package that came under COVID-19 Emergency COVID Loan, as loans up to ₹20 lakh were given only to the existing borrowers and not to new borrowers and because of this, small companies suffered huge working capital shortage.

The labour disruption caused by the departure of migrants is yet to normalise even after six months with 15-20% workers either permanently moving out or yet to return, hurting the labour intensive industries like garments the most, said trade bodies.

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