- A survey has estimated 2.5-3 crore job losses in the MSME sector by June-end
- Another 1-1.5 crore workers could be handed out pink slips by next month as financial health of MSMEs remains precarious
- As much as 61% of the MSMEs have said that they are not in the position to service the debt from September once the moratorium period expires
- 42% of all MSMEs surveyed said that reducing imports from China will not help their business
With micro, small and medium enterprises (MSMEs) grappling with coronavirus pandemic woes, a private survey has estimated 2.5-3 crore job losses in the sector by June-end. Another 1-1.5 crore workers could be handed out pink slips by next month.
With the cash position of the MSMEs remaining precarious due to delayed payments from buyers, as many as 37 per cent firms surveyed in June said that they needed to cut upto 50 per cent salaries to remain afloat.
There are, however, signs of green shoots given that business sentiment in the sector has marginally improved since the worst month of April when 42 per cent firms wanted to slash employee salaries by half.
The survey stated that minimal hiring has started in the sector, and while businesses are restarting, they remain acutely stressed. The Rs 3 lakh crore package announced as part of Atma Nirbhar Bharat scheme, term loan moratorium and deferment of taxes have enabled some liquidity for the struggling sector.
The survey carried out jointly by industry body Federation of Indian Micro and Small & Medium Enterprises (FISME), SKOCH Group, Bhartiya Vitta Salahkar Samiti (BVSS) and Tax Law Educare Society (TALES) found that a large number of MSMEs need credit given that the Rs 3 lakh crore package had fulfilled only 19 per cent of the demand.
Further, the sector is likely to see huge non-performing assets (NPAs) and there was need to restructure all term loans under moratorium.
As much as 61 per cent of the MSMEs have said that they are not in the position to service the debt from September once the moratorium period expires. While 37 per cent of the MSMEs want the moratorium to be extended by another 6 months, 32 per cent respondents last month suggested a 1-year extension.
The MSMEs continue to complain about delayed payments from corporates and government entities adding to their stressed finances.
"Cash flows and delayed payments remain a huge problem. Government payments and tax refunds completely (also remain) unsatisfactory," noted the third multi-institutional survey on MSMEs in the country for the April-June period.
In June, 35 per cent MSMEs said that they received payments for supplies in 90-180 days while 24 per cent claimed their dues remained pending for more than 180 days.
Stating that business confidence was bleak in the sector, the survey said that MSMEs need Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) like job scheme for urban India which could be used for MSME wages.
In an interesting finding, the majority of the MSMEs supported the move to stop imports from China. However, 42 per cent of all those surveyed said that reducing imports from China will not help their business.