Coronavirus: MSMEs will need stimulus package, cut in GST to recover, says ASSOCHAM President
The coronavirus outbreak has brought the world to a grinding halt. India too is fighting a life and death battle to flatten the curve. On April 14, Prime Minister Narendra Modi announced the extension of the lockdown across the nation till May 3, albeit with some relaxations.
The coronavirus pandemic is a unique situation. Governments across the world are grappling with the crisis and struggling to understand how to stop the global economy from falling into vicious economic traps.
Niranjan Hiranandani, President, ASSOCHAM
India is one such place where businesses are suffering and the spread of the virus has spelt doom for the entire ecosystem. The World Bank recently forecast India’s growth estimates between 1.5 percent and 2.8 percent whereas the International Monetary Fund (IMF) announced the growth estimate to stand at 1.9 percent for India following the impact of the pandemic and the lockdown.
More than 65 million micro, small, and medium enterprises (MSMEs) in the country form the backbone of the economy. The segment is in dire need of relief packages, support in working capital loans, and strengthening or fixing of supply chains which have been disrupted, among other needs.
MSMEs in India are not only important for their contribution to the Gross Domestic Product (GDP) which is around 30 percent but also for mass employment they create.
SMBStory spoke to Niranjan Hiranandani, President of Associated Chambers of Commerce and Industry of India (ASSOCHAM) over the impact of the pandemic on MSMEs as well as the road ahead for them.
Edited excerpts from the interview:
SMBStory (SMBS): What steps is ASSOCHAM taking to reduce the impact of the pandemic on MSMEs?
Niranjan Hiranandani (NH): ASSOCHAM combines the entrepreneurial spirit and business acumen of owners with management skills and expertise of professionals to set itself apart as a Chamber with a difference. It has almost 4,50,000 micro, small and medium enterprises (MSMEs) as members.
We are concerned about them. And we do understand that they bring about huge employment in the country and are extremely important to the country’s economy. Discussions with the Prime Minister, Finance Minister and the government are underway over a stimulus package for the MSMEs.
We also moved the Reserve Bank of India (RBI) seeking a package of one time rollover for the MSMEs, which it has provided. It includes restructuring of the loans and the potential non-performing assets (NPAs) of the MSMEs. We have also asked for a financial package which can provide additional working capital to the MSMEs, which is important for their functioning.
The chairman of the State Bank of India has agreed that MSMEs need finance in their working capital up to 10 percent. The MSMEs can apply directly to the local bank or the local regional office and get 10 percent of the incremental value of their loan.
However, we have not yet received a similar kind of relief for the non-banking financial companies (NBFCs).
We have approached the Finance Minister to also include NBFCs in their relief packages because MSMEs are more concerned about NBFCs and not necessarily the banks.
The other side is that the MSMEs which are into factory production are likely to start very soon.
A recommendation was sent by the Ministry of Commerce and Industry to the Home Minister on Saturday, April 11, and we are hopeful that within a day or two it will be accepted. Once that happens, MSMEs will be in a better position to start their small manufacturing units.
SMBS: Goods and Services Tax (GST) is another concern that causes a huge financial burden on small businesses in India. What steps should be taken to reduce the negative impact of GST in the post coronavirus era?
NH: We are asking for a 50 percent sabbatical on GST for the next six months across the board to provide a stimulus to the demand side of the economy.
Moreover, we have asked for adjustments not only in GST, but also in income tax refunds. These refunds should immediately be given to the MSMEs. There are also PSU payments which are due. We have also asked the government to clear all the pending dues to the MSMEs for a long period of time to provide them relief.
The other dues from the state governments, fertiliser cooperation, and other DISCOMs which have to be paid to the small enterprises should be paid as early as possible.
We have been representing small and medium enterprises. And we are hopeful that the stimulus package will certainly take into consideration this sector, which provides huge employment in the country.
SMBS: What are the steps government needs to take to help MSMEs recover?
NH: The first thing is to save lives. So, let’s focus on saving lives in the next five to six weeks. In the meantime, we must have a stimulus package with the intervention of the RBI, liquidity should improve, and GST should be reduced.
In addition, the government needs to pay its dues. We need to improve and put money into infrastructure in India. So, once the problems on the health side get mitigated, we are already on the road to recovery. But if you do not have a stimulus package, and do not put in enough hard work, then the recovery is not going to be easy.
SMBS: You have seen many governments and policies change and calamities strike. What aspects are important for MSMEs to survive?
NH: Willingness to change, to learn, adopt new technology, coupled with a lot of hard work can ensure that you don’t fail in the long run even though you may have short-term problems.
Coronavirus has hit everyone like a tsunami. These are hard times. But now the important thing is to get up and take care of ourselves and be ready for the good times which will come in the future. But remember, the good times may not be in the same pattern which we are used to. So, you have to adapt yourself to the new pattern of business or work that is necessary.
Businesses need to look forward and the idea is to identify the new opportunities that are going to come. Part of it will be looked after by the government and small businesses will have to meet some challenges. Entrepreneurs need to have fire in their belly.