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Failed Trajectory for Small Businesses
Rajen Kumar
October, 2020


The spread of Covid-19 followed by lockdowns has resulted in a severe blow to the small businesses in India like never before. The national economic growth has been greatly hampered offsetting the government’s push for Making in India. 

India’s Micro, Small, and Medium Enterprises (MSMEs) sector, the largest in the world after China, engaged in the manufacturing of over 6000 products besides providing a wide range of services failed to hold the fort owing to the lacklustre attitude of the government. The sector, poised for rapid growth and its integration with the global value chains, has been hit on many grounds. According to the recent Annual Report of Department of MSMEs, there are 6.34 crore MSMEs of which about 51 per cent are situated in rural India. Together, they employ a little over 110 million people but 55 per cent of the employment happens in the urban MSMEs.

 Instead of rational announcements to handhold the sector, the government chose to redefine the sector changing the criterion for the definition. The package called the PM Garib Kalyan Yojna has failed to make any impact even while hundreds of thousands of stranded migrant workers across the country, become the worst casualty of Covid-19. 

In a slew of measures, banks have been advised to offer loans for easy cash flow to the small business enterprises. What was immediately required was to offer whole-heartedly market support to the enterprises by announcing buy-back schemes. If the goods and wares produced by MSMEs are sold easing cash flow, then where would the need for seeking outside finance arise?

Recent surveys have revealed that a large number of MSMEs are responsible for the mounting NPAs desisting banks from offering loans to the MSMEs. “Collateral-free loans under CGTMSE have announced by increasing the amount manifold but why should banks entertain such scheme as all the onus of recovery rests on banks? It is a risky proposition in the face of mounting NPAs”, quipped a senior bank official. 

The government has to come out with a working trajectory for the MSMEs sector which is amply defined as the spine of the industrial growth of the country as also the pipelines to the corporate. Let these pipelines do not get blocked and choke the economy.

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