Home >News >India >Covid-19 lockdown: MSMEs could see profits decline by up to 1.2 trillion

NEW DELHI: The pandemic and the ensuing lockdown could drive down profits of medium, small and micro enterprises (MSMEs) by as much as 1.2 trillion, an alliance of industry leaders and bureaucrats said in a report to the Union government on Saturday.

It has suggested a roadmap for revival of such companies, with turnover of 75-250 crore, while calling for job creation.

There is an urgent need to reduce compliance burden, create special economic zones for small and medium enterprises, and attract private anchor investors, and facilitate MSME-bank partnership, according to the Global Alliance of Mass Entrepreneurship (Game), led by Ravi Venkatesan, former Microsoft India head and former chairman of the Bank of Baroda.

At least 73% of MSMEs have reported a drop in orders, while 50% have indicated a 15% rise in inventory levels amid demand erosion, supply chain disruption, and non-payment of dues.

"This could cause significant compression estimated at 0.8-1.2 lakh crore in profits for companies with turnover between 75-250 crore," the Game report said.

The alliance comprises Manish Sabharwal, chairman of Teamlease Services, Anand Deshpande, founder and chairman of Persistent Systems, KP Krishnan, former secretary of skill development and entrepreneurship, Sanjiv Puri, executive director of ITC, Srinivasan S. C., executive director of Bosch India, among others.

It said, in the short term, the government must enable a "strong execution of announced packages through state governments and local industry bodies, including clear communication of scheme details to MSMEs and banks" while ensuring funds allocated "are being distributed to small and micro businesses."

It added that the Centre should set up "funds directed at new-to-credit MSMEs and enable banks to support existing loans on MSMEs, and ensure easy repayment options for higher recovery."

For the medium term, it suggests to further improve ease of doing business and reduce compliance burden, which they said are deterring formalisation. The industry alliance said "starting and running a business today entails navigating a complex landscape of around 58,000 compliances and time-consuming application processes, with few avenues of support."

There is a need to decriminalise laws around compliance for running a business, which are today a major deterrent, the report said and claimed that around 9,000 compliances in India currently have a penal action.

“Evaluate ease of doing business at a state level along with objective and measurable criteria, and publish a scorecard periodically to promote development," the GAME alliance said in its report as part of the medium term initiatives required for the sector.

For the long term, Venkatesan suggests creating "a self-sustaining pipeline of entrepreneurs by investing in education and incubation…setting up incubation centres for new entrepreneurial ventures" and establishing "dedicated land hubs, SEZs with associated physical, and digital infrastructure."

The report said there is need to demonstrate significant growth among small enterprises early and encourage the ecosystem of bankers and partners to provide support.

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