The government has already pledged ₹3 trillion support to the MSME sector, the backbone of the Indian economy
MSMEs are also worried about sourcing raw material from China, amid calls to boycott its products in the wake of the Ladakh border clash
Small businesses may struggle with cash flows once the loan moratorium is over, but the future is not all gloom and doom for them, panellists at Mint’s Pivot or Perish webinar on micro, small and medium enterprises (MSMEs) said.
The economy is showing signs of recovery, and many MSME borrowers are repaying lenders, they said. MSMEs are also worried about sourcing raw material from China, amid calls to boycott its products in the wake of the Ladakh border clash.
“In many of the banks and NBFCs (non-banking financial companies), much of the portfolio has withstood the pressure. The post-moratorium scenario depends on how quickly the normalization happens," said C.S. Setty, managing director, State Bank of India. According to him, among MSMEs, some can boost production quickly, some might need loan recasts, and yet some others have existing problems, worsened by the covid-19 pandemic. There is no apocalypse ahead for MSMEs once the moratorium ends, he said.
The government has already pledged ₹3 trillion support to the MSME sector, the backbone of the Indian economy.
Deepak Jain, president of the Automotive Component Manufacturers Association (ACMA) of India, said he is “optimistic" of a recovery, pointing to the role of direct benefit transfers in farmer welfare and rising tractor sales.
He added that the current focus is to keep shop floors running despite muted demand and rising costs.
Against the backdrop of rising nationalist sentiments after 20 Indian soldiers died in a border conflict with China, panellists cautioned against any knee-jerk reaction.
Naushad Forbes, co-chairman, Forbes Marshall, pointed out that China is India’s second largest trade partner, and India exports around $15 billion to China and imports $75 billion from it every year. “We see delays taking place in consignments coming into the country and extra inspections," said Forbes, adding whether delaying imports really benefits us. India should diversify sourcing away from China perhaps over the next couple of years, he added.
Hardika Shah, founder and CEO of Kinara Capital, said while its customers (micro enterprises) were worried about revenues during the lockdown, nearly 75% are now worried about availability of Chinese raw materials.
The participants also discussed where small businesses stand in terms of technology penetration and how it can be improved.
“Out of 75 million MSMEs in the country only about 2 million have an active online presence. We need to help them find new channels to connect to their customers and to enable them to run their business on their phones instead of depending on systems," said Kamal Kanth, regional vice-president, Salesforce India.
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