K.E.Raghunathan Founder Chairman – Association of Indian Entrepreneurs and Former National President of All India Manufacturers Organisation and Convenor of Consortium of Indian Associations are of the view that demonetization in 2016 and then the GST introduction in 2017 and then the economic slowdown we had in 2018 & 2019, and then COVID-1 in 2020 and COVID-2 in 2021 have actually been repeatedly knocking off these two industries which are the driving force of our MSMEs.
Q: Can Indian MSMEs afford another economic slowdown?
Answer: The MSMEs especially the micro and small enterprises in India are already started buckling. Our Survey which was done two years back reveals that 30% of micro and small enterprises in India have perished from their operation. So, the setback or the rolling down started with the demonetization in 2016 and then the GST introduction in 2017 and then the economic slowdown we had in 2018 & 2019, and then COVID-1 in 2020 and COVID-2 in 2021. This is where the real economy has started falling flat.
If we take two major sectors that employs and engages small and micro-enterprises globally, one is the real estate/construction industry and the second is the automobile industry. As we know the automobile industry has been shifting from conventional petrol and diesel to EEV vehicles and therefore there is a huge amount of recession happing in the automobile industry because the conversion into six Bharat appliances compiled with the EEV revolution has pushed the sale of the auto regular petrol and diesel and the second thing is real estate and construction factor.
As we know how the market has been crumbling in the last four years and therefore the MSMEs which were dependent on them have started buckling up under the prices. Covid has only hastened the process.
Q: Do you apprehend another economic slowdown? Do you also think it will not go to end near future?
Answer: When we talk to small and micro-entrepreneurs the recession is basically, if we are unable to predict the future of our business or if I am unable to handle today’s business activities profitably then I called myself into the state of indisposition. It’s likely to take a longer period of time before normalcy is restored. But people are buckling more and more because the government has not recognized the pain of the micro and small entrepreneurs and they are not able to address any stimulus packages for those who have suffered from a lot.
For example, Ford closed the companies in Chennai. It has rented three hundred micro or small enterprises which were completely dependent on ford redundant. So, we have not administered at every stage what the government has proposed, for example, the demonetization or the GST or lockdown condition because it’s all of a sudden without given any chance for the small enterprises to be prepared. After six months of lockdown, the business faced a huge loss, it also faced losses like their raw materials were not used and perished, machinery losses, and due to the absence of insurance being in unorganized sectors, these company had to pay for their own losses. They were not provided support for their losses by the banks or the government.
During the Covid 2 situation, there was shortage of oxygen in the market as it was important to save the lives of human beings, so the government has to ban Oxygen for the industrial usage. The fabrication industry that uses Oxygen for the fabric works could not operate for four month and they did not get any assistance to compensate this loss.
Therefore, enough attempts were made to put forward this problem in front of the government but the government did not recognize this as an issue. Therefore, the cancer of the initial stage could have been cured but it has spread all over the body. Today the MSMEs especially the micro and small entrepreneurs do not know how to run, how to hire and pay their labor, how to repay the loan, or how to make profitability, everything seems to be an issue and the chaotic situation confuses the state of mind and it is very much evident in the eyes of the people.
Q: Is Gov’t paying enough attention to MSMEs’ causes and cries?
Answer: The micro-enterprises which are the highest number almost 99% of industries are micro-enterprises which means the turnover is less than 5 Crore, most of them are unorganized sector. For example, we take the MSMEs industry’s portal, it has not even crossed 1 Crore registration till now. Even though we are expecting 10 to 11 crores of MSMEs in India currently under the new classification tool.
So we have not been able to enroll not even 10% as a database. The first problem is that the government does not have a database. Secondly, they are in unorganized sector. Therefore, the government of India took the decision to support the bigger industries or the corporate entities so that if they’re able to survive, dependent industries and processes will be automatically able to survive. So, the government came up with production-related incentive schemes. Then the corporate companies will produce to make a profit so that they can pay off the loan, wave off certain capital taxes, and all the support to corporate entities.
All this support they have given to the corporate entities. The problem lie here is, on one side there is huge collection of GST and on the other side, we see the difference between the projected amount and the huge collection of tax revenue has almost fallen down. Here government is not the loser rather it is actually the micro or small enterprises who have become losers in the game.
Therefore, it’s very difficult for the government to administer any prescription for these people. Firstly, they don’t know how to address the problem so they don’t recognize it as a problem at all.