Most small and medium businesses in India are facing difficulty in getting loans as they are first-time borrowers financially excluded from the formal banking system, said Ravi Venkatesan, chairman of the Global Alliance for Mass Entrepreneurship (GAME), which works as an industry body for micro, small and medium enterprises (MSMEs).
Venkatesan said most small firms are still “confused” about the government’s recent stimulus measures for the sector, such as the Rs 3 lakh-crore collateral-free loans and the Rs 10,000 core fund-of-funds for equity infusion into MSMEs.
“There is confusion for sure — that is the kind of broad message we are getting from small and medium enterprises. The question of channels (for disbursement) is extremely important and the guidelines are not fleshed out yet,” Venkatesan said, adding that “the vast majority of them are still under drought”.
GAME, which has highlighted the challenges facing MSMEs across 5 states, said many small and medium firms do not foresee a revival of their business.
“Overall, I still believe the realistic scenario is a very large number of enterprises failing to reopen. A lot of our focus is to figure out how we can get a new breed of enterprises to emerge,” said Venkatesan.
On Tuesday, the All India Manufacturers’ Organisation (AIMO) said that nearly 35% of MSMEs and 37% of self-employed individuals in India have begun to shut shop, as they see no prospects of revival following the lockdown due to the Covid-19 pandemic.
In a survey report released on Thursday, AIMO said more than 70% of MSMEs would reduce headcount. There would be more clarity on the extent of job losses by August-end as most MSMEs are still uncertain about the return of their workers, it said.
“Generally, there is a great sense of openness (on government’s part) as they are realising that they do not have all the answers. A lot of the action is happening at the state and local level,” Venkatesan said, adding that the Centre “has a great role to play”.
“Stimulus, the reclassification of the MSME segment, these are important ones. But eventually what matters is what happens on the ground – how the money actually flows to the MSMEs. One of the biggest challenges is, how do you improve the ease of doing business…”
Some small entrepreneurs, according to GAME, are hopeful of bouncing back in four months, although they foresee many challenges in reopening.
“Many companies with a disproportionate share of migrant workers would struggle to meet their demand. There are more questions than answers now. People who have left the city are highly traumatised, many of them may reconsider whether life in a city is worth it. It is also possible some of them may come back,” said Venkatesan.
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