Measures that can boost MSMEs during Covid-19 lockdown

By Sampad Swain
Businesses have been taking a hit due to Covid-19 lockdown. The supply chain has been disrupted, imports are down, and markets are bearish. The MSME segment has perhaps been the hardest hit.

Challenges for the MSME sector
According to a recent GOQii survey, about 26% of businesses surveyed said their sales and purchases have been impacted due to the virus outbreak. MSMEs are grappling with problems like low liquidity or cash flow and lack of workforce as the daily-wagers have gone to their villages.

Businesses that are into manufacturing will also take a hit on export business as the situation remains uncertain. The services sector is also slowing down with more people opting for social isolation.

How can the government help?
The government has started taking some steps to keep the MSME segment afloat. The Reserve Bank of India recently introduced Long Term Repo Operations (LTRO) worth Rs 100,000 crore to help banks increase lending at cheaper interest rates.

Government-run banks are also being encouraged to keep loans worth Rs 60,000 crore ready.

In addition, Finance Minister, Nirmala Sithraman, also announced the extension of the last date to file belated Income Tax Return for all businesses for the FY 2018-19 from March 31 to June 30.The deadline for GST returns filing for March, April and May is now June 30.

While these measures give some hope to the MSME sector, there are a few more steps that the government can take to ensure aid to the ailing business sector.

1. Why assemble in India, when we can Make-in-India?
Now could be the right time for the Government to roll out sops to MSMEs that manufacture locally. The Government eMarketplace (GeM) could be of great use to suppliers looking for purchasers and vice versa. Investing in online infrastructure while also encouraging small businesses to source locally could help improve manufacturing while also cutting on our import costs.

2. Delay MSME loan repayments or extend tenures
As the RBI pumps in more cash into the banking sector, deferring or relieving the MSMEs of loan repayments could come as a welcome move. Most businesses are looking for financial support from the government and doing this can help them cope with cash flow problems. Relaxing bad loan norms could also be a saving move for this sector.

3. Inventory management for exporters
Businesses that are into exports could use some help with inventory management. In the Union Budget 2020, Sitharaman proposed building warehouses at block/taluk level. If the government could allot subsidised warehousing to exporters while figuring out the supply chain side of things, it could potentially help support the economy.

The Covid-19 situation has put businesses in a tight situation but if the government can take measures and ensure immediate action, it could reduce the blow to the MSME segment.

(The writer is CEO and Co founder of Instamojo.)