More serious than expected the employment picture in the MSME sector

Retailers' Association of India (RAI) has reported a 79 per cent drop in retail sales in May 2021 as compared to May 2019.

The Corona epidemic has affected every class except a few billionaires. Frequent lockdowns have severely disrupted the production, distribution and supply of goods in addition to the service sector. Jobs are lost. Corona has caused one way or another for families from the upper middle class to the poor.

During this horrific period, I have kept an eye on the state of agriculture, micro, small and medium enterprises (MSMEs) and the service sector as these sectors provide a large number of jobs.

Special focus on MSMEs

This article highlights the MSME sector. Of the new NPAs added in April and May, 40 per cent were from the MSME sector, more than double the previous ones, a bank official said in a press statement. According to the Retailers' Association of India (RAI), retail sales fell by 4% in May 2018 compared to May 2016.

Decided to check the fact of these reports. For this I hired an expert team and they conducted a telephonic survey. The team got the names of each MSME in Tamil Nadu and asked 15 questions to their managers. The answers to the questions received in this telephonic survey have concluded that the situation is more serious than the report given by Rai and the Sadar Bank official, not only the situation is dire compared to the claims being made at the government level.

The following answers were received in response to the 12 questions asked.

1. Of the 208 MSMEs surveyed, 1,200 respondents, or 5 per cent, said their sales had declined in 2020-21 compared to the financial year 2015-16.

. The 21 MSMEs claimed a 2 per cent drop in sales, while 8 respondents reported a 5 to 20 per cent decline in the survey and three respondents a more than 50 per cent decline. 21 MSMEs were completely locked up.

3.91 per cent respondents said that the loss was as expected in the financial year 2020-21.

. In 90% of the cases, the loss was up to Rs 10 lakh.

. The 500 defendants paid for the losses by paying their own fines. ૨૮૫ was forced to sell assets to make up for the loss. એમ MSMEs borrowed money from banks or NBFCs to cover losses while 21 respondents obtained money from other sources. Very few of them took advantage of The Emergency Credit Line Guarantee Scheme, which was started with Corona in mind.

. When asked if your business or unit has been in operation since April 1, 2021, 3 out of 15 respondents, i.e. 5 per cent, said no. Only ten percent said they were working close to full capacity.

Massive decline in employment

. In the financial year 2020-21 (Corona's year), 12 per cent of MSMEs who answered the question said they had cut wages, 4 per cent laid off employees and 15 per cent did both.

. Results on employment were expected. Out of 13 respondents, 4 per cent, i.e. 1,200 respondents, had employed fewer people in the last financial year as compared to 2015-20. The fact is that there was a serious decline in employment in the last financial year.

. Most of the small and medium units in MSMEs provide employment to twenty or less employees. Of the 114 respondents, 9 per cent said they had laid off five employees from their units, while 8 per cent said they had laid off 8 to 10 employees each. If the average layoff of five employees per unit is multiplied by the millions of MSMEs in the country, it is possible to estimate how many people would have lost their jobs.

10. In the current financial year i.e. 2021-2, the employment situation has improved, right? Fifty per cent of the 19 respondents said that each or a few who had been laid off had returned to work, while 50 per cent said not a single employee had returned to work.

11. Of the 1,610 enterprises that closed in the last financial year, 20 or 21 per cent have not reopened and 5 or 55 per cent have partially reopened. Only 214, or 15 per cent, have been able to fully resume.

13. Of the 12 units currently closed, 200 (5 per cent) are expected to reopen. On the other hand, 4% said that they have locked up permanently. It is unknown at this time what he will do after leaving the post.

The government can't take care

It has now been proved that the government has not done anything to keep MSMEs functioning. With regard to the credit guarantee scheme, it was believed that the government had provided a default guarantee of up to Rs 3 lakh crore. But the government later clarified that a total of Rs 500,000 crore of credit would be provided under the scheme. Given the state of MSME's balance sheets, it is also becoming difficult for banks to meet the Rs 500,000 crore target. So far, only Rs 1,50,000 crore has been released under this scheme. The Corona epidemic has killed the enthusiasm of small industrial units and the government has been a silent spectator.