Ravi Venkatesan, chairman of Global Alliance for Mass Entrepreneurship (GAME), recently stated that over one fourth of India’s MSMEs may shut down, if the national lockdown continues for long. If it extends to more than four to eight weeks, most of these businesses would be facing a severe cash crunch, which could put a permanent dent in their long term prospects.
Referencing data presented by the All Indian Manufacturers’ Association, Venkatesan said that “19% to 43% of the MSMEs may disappear if the crisis persists 4 or 8 weeks”.
The primary challenge due to the fall in business would be shortage of funds, while logistical restrictions would lead to loss of large quantities of perishable goods. In addition to this, MSMEs would also have to combat the operational challenges that accompany reduced manpower, since most migrant workers and labourers are returning to their hometown, plagued by hopelessness.
The former co-chairman of Infosys and chairman of Bank of Baroda, said that GAME is currently working on setting up a $100-million Small Business Stabilisation Fund, aimed at helping these small businesses weather the economic damage of this crisis.
Scheduled to be established in a couple of weeks, the fund will be used to offer low-interest loans to such businesses, along with a moratorium of up to three months for repayment. Responsible for creating over 90% of the jobs in India, the MSME sector in the country could see a vast number of these jobs disappear, if the situation continues the same way. The association for entrepreneurs reiterated this, stating that each sector would see loss of jobs, because of the lockdown.
According to Mr Venkatesan, the hospitality industry, responsible for employing as many as 4 crore people, can see a loss of roughly 1.2 crore jobs by the end of the crisis. On the other hand, the retail industry, employing 4.6 crore people, could see up to 1.1 crore jobs disappearing due to the crisis.
As such, GAME stated that it would soon hold discussions with the government to create effective measures that can prevent the “mass extinction” of these MSMEs, due to the economic slowdown.