MSME Businesses in India – Now & Journey AheadMSME Businesses in India – Now & Journey AheadMSME Businesses in India – Now & Journey AheadMSME Businesses in India – Now & Journey Ahead
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Rejuvenating the Indian Economy post Covid
September 15, 2020
Published by Rahul Choudhury at September 16, 2020
MSME India

MSME Businesses in India – Now & Journey Ahead


Rahul

Author :

Varun Saxena Young Leader - IndiaGlocal

Rahul Choudhury is a full time post graduate business management candidate at Indian Institute of Management, Kashipur. This article was submitted as part of his selection process as an IndiaGlocal - Young Leader. The views and opinion in the article are solely of the author.


It is of no contradiction that like every other country, businesses in India is expected to undergo a sea of change post the pandemic. Majority of the businesses are following a data-driven investing strategy. Ecommerce in India was booming at a reasonable rate of approximately 13% pre pandemic and the growth penetration was expected to be as high as 50% within the next 5 years. The pandemic has opened up an entirely new set of spaces for small businesses to evolve. Covid-19 have been a key driver in accelerating the growth of ecommerce as businesses have realized the “new normal” and rationale behind investing hugely on online technologies.

Recent reports suggest that, more than Indian businesses have shown resilience in terms of preparedness and have contingency plans ready to operate in the future as things slowly start getting back to normal state of affairs. Amidst the pandemic, our PM have urged people to be self-reliant and stressed upon the need for “vocal for local” to curtain the import costs incurred by India and for the sustenance of our Micro, small and medium scale enterprises (MSMEs). “Vocal for Local” lays a deep focus on the use of indigenous products. MSME sector forms the backbone of the Indian economy providing employment to more than 100 million people of the country and make a substantial contribution (approximately 45%) to the Indian GDP.

In this regard, Industry 4.0 acts as a pertinent yet probable solution for the MSMEs to survive under the current scenario and road ahead. The supply and demand dynamics have changed radically owing to Covid-19. The Indian MSMEs are running short out of their reserves. Still the MSME are running short of labour as majority of the workforce have not yet returned to workplace and are hoped to return in a staggered mode in the upcoming months. The COVID specific measures in the form of lockdowns and quarantines have led to sharp drop in capacity utilization in the recent times as the industry threatens to hit an all time low in a decade. The loss in demand and revenue have subsequently crippled the MSME.

So, what can be done to sustain the MSME businesses going forward? Like several other government of developed countries, these businesses can be provided a tax relief over a substantial period of time. Moreover, with the magnanimous supply and demand shock, the MSME sector needs to provided significant amount of support for a longer period of time including encouraging compulsory usage of protective equipment in workplaces, further investments in digitization which means a significant rise in fixed costs. The Government have launched quite a handful of digital initiatives in the recent past. The COVID-19 scenario has further accelerated the implementation of electronic market linkages for the MSMEs which will act as a virtual platform between buyers and sellers across the country and are expected to replace the existing trade fair and expos.

So, there are risks associated with digitization as well. There are increased chances of security breaches. In this regard, payment providers like Paypal have made a significant impact already in the seamless facilitation of providing secured services for both the providers and the customers involved. COVID-19 have also allowed or rather forced the Indian businesses to actively look out for localized quality CRM products in place of heavy reliance on global CRM systems. Policy mixes involving higher focus on digital supply networks is expected to play a pivotal role in the upcoming days in terms of rapid growth and sustainability of the MSMEs. Small retailers need to be encouraged to join the e-commerce fold. Deficit financing finds a golden opportunity amidst this pandemic. Of course, there are refinancing facilities available to the MSMEs from the funds allocated to SIDBI but clearly that’s not enough in light of this pandemic. The 45-day quick release of receivables for the MSMEs have been a welcome initiative from the Government point of view.

Going forward, the key lies in the successful participation of public, private and government enterprises to bounce back from this pandemic effects. Higher focus should be placed on ensuring the liquidity by planning out a well-developed cost reduction structure which should focus on the various aspects viz getting rid of unwanted assets and having the sole focus to maintain a positive cash flow. Good governance, strict monitoring and well setup MIS will eventually help the businesses to see off this situation and flourish in the upcoming days.

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