Editorial: Revive small-scale sector
Though the latest data suggests that India’s GDP grew 8.4% in the July-September quarter— no doubt an encouraging performance given the gloomy predictions earlier — it is still premature for any celebrations. The economy is still reeling under the impact of the devastating pandemic and the worst is not yet over, a fact borne out […]
Though the latest data suggests that India’s GDP grew 8.4% in the July-September quarter— no doubt an encouraging performance given the gloomy predictions earlier — it is still premature for any celebrations. The economy is still reeling under the impact of the devastating pandemic and the worst is not yet over, a fact borne out by the struggling informal sector. Micro, small and medium enterprises (MSMEs), which bore the brunt of the pandemic, are still gasping for breath and desperately need further help from the Centre. The last five years have been very challenging for industry, particularly MSMEs. A string of disruptions caused by demonetisation, hasty rollout of the GST regime and the Covid-induced lockdowns have wreaked havoc on the industrial sector. According to the data presented to the Lok Sabha recently, over 5 lakh companies have been shut since April 1, 2016. Of these, more than 64,000 firms went out of business in the northern region where the closures outnumbered new registrations during this period. The situation is quite alarming and calls for a nationwide audit to determine which industries require hand-holding the most. Though the Centre had promised to provide help to the units which were closed during the pandemic to enable them to get back on their feet, there has been no follow-up action. A workable revival plan that facilitates the restoration and creation of jobs must be implemented at the national and State levels.
The impact of the much-touted Rs 20 lakh crore ‘Atmanirbhar’ package, announced by the NDA government last year, has been minimal on the MSMEs sector. The schemes that targeted the MSMEs — one for the stressed ones and the other for those that innovate — were non-starters. For instance, in Telangana, nearly 80% of the MSMEs faced a negative impact due to the lockdown last year. It must be pointed out that the robustness of post-pandemic economic recovery depends on pulling the MSMEs out of dire straits. Though over 7 lakh new firms were incorporated under the Companies Act during the past five years, many of them have been hit hard by the pandemic leading to financial distress. Such companies need government’s support to sustain their operations. Despite accounting for 45% of the total manufacturing output, 40% of exports and 30% of the GDP, the MSME sector remains at the bottom of the pyramid, bearing the brunt of the double whammy of economic slowdown and the coronavirus pandemic. A country that aspires to be a global leader in startups should go the extra mile to reinvigorate the ailing enterprises with policy interventions. The support to small businesses is crucial to reviving the economy as they are the major job creators. With private investment and consumption still being low, the government must step in and spend more without creating excess inflation.
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