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COVID-19’s impact on MSME

May 16, 2020

The lockdown has delivered a death blow to large number of Micro, Medium and small scale industries. These industries cannot sustain the shock of grinding halt to supply and chain rendering the laborers jobless driving them away from sustenance of healthy living.

In terms of ad-hoc relief measures, many public sector banks looking into the distress of MSMEs have introduced emergency credit lines wherein a maximum loan amount of up to Rs 200 crore or 10 percent of the existing fund-based working capital limits can be availed by MSME borrowers. The Small Industries Development Bank India has announced a concessional interest rate of 5 percent for MSME loans under the SIDBI Assistance to Facilitate Emergency Response against Covid-19.

Despite the measures announced there is huge salary cut or creditors given the current freeze on production and supply coupled with slowing demand. Countries around the World like Brazil and Canada have offered subsidies for the lockdown period. While India is lagging behind in bringing any survival scheme, except the campaigners of the political parties doing their bit with sole objective of vote banks and face value commitments. A subsidy package is therefore necessary with coverage of ration, medical subsidies for 11 crores daily workers absorbed in MSMEs. Formal Credit channels like NBFCs will aid in better financial help than any slow paced government schemes of poor implementations and lesser outreach. But the businesses are required to be opened in phased manner with a structured plan albeit precautionary methods employed and operations will increase the outflow of finances.

Author:
Arunima Shastri, Assistant Professor, Unitedworld School of Law (UWSL)

Disclaimer: The opinions / views expressed in this article are solely of the author in his / her individual capacity. They do not purport to reflect the opinions and/or views of the College and/or University or its members.

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