Economic Relief package for small businesses

Thingbaijam Dhamen *

The novel corona virus has wreaked havoc across the world, affecting the global economy, killing over 3.39 million people (as on May 23 2020) and infecting millions. In the absence of a vaccine or drug to beat the contagious disease, many countries including India chose lockdown as a means to slow down the spread of the virus and save lives.

To shut down the entire nation of 1.3 billion people to slow down the spread of COVID-19 pandemic is a bold move which Narendra Modi government has taken with the notion that “the priory of the government is to save each and every life.”

The situation arising out of spread of the pandemic in the country has necessitated the tough decision. It was taken despite the fact that the government knew the severe impact it will give to the economy of the nation.

The economy of the country was expected to lose over Rs 32,000 crore every day during the complete lockdown, which was declared on March 24, following the corona virus outbreak. The economic impact of the COVID-19 pandemic in India has been largely disruptive.

The World Bank and rating agencies had initially downgraded India’s growth for fiscal year 2021 with the lowest figures India has seen in three decades since India’s economic liberalization in the 1990s. Within a month, unemployment rose from 6.7% on 15 March to 26% on 19 April. More than 45% of households across the nation have reported an income drop as compared to the previous year.

To cope with the impending severe impact to the economy of the nation, the Central government, on May 13, unveiled a major booster dose of Economic Package entailing a series of initiatives for micro, small and medium enterprises including Rs three lakh crore worth of collateral-free automatic loans for businesses.

A subordinate debt of Rs 20,000 crore for stressed units, a fund of funds for equity infusion of Rs 50,000 crore and revision in the definition of MSME are among the steps announced by the government to help MSMEs recover from disruption caused by the corona virus-induced lockdown.

The MSME sector employs 11 crore people, comprising 45 percent of country’s manufacturing output, 40 per cent of exports and almost 30 per cent of the GDP. This sector has been hit hard by the lockdown due to corona virus pandemic, with millions of unit staring at the prospect of closure and the threat of job losses.

To provide much-needed liquidity to millions of units in distress, Finance Minister Nirmala Sitharaman announced the relief measures. They reflect Prime Minister Narendra Modi’s commitment to revive the economy, help small businesses and boost employment. These measures will surely help small businesses meet their operational liabilities, some of which have built up due to COVID-19, and resume their business.

Impact on Manipur

Centre’s relief measures will be a boost for the North Eastern states including state like Manipur which has a share 0.3 per cent in MSME businesses against its 0.2 per cent share in national population. As per the Ministry of MSME, report, from 2015 to 2019, a total of 68.25 lakh business registrations were done in the Udyog Aadhaar Memorandum (UAM) for the country.

Manipur tops the MSME business registration in NE. Out of 68.25 lakh business in Northeast region, the state has around 12,438 business registrations, Tripura had 2317, Assam had 2000, Mizoram had 1003, Meghalaya had 795, Nagaland had 292 and Sikkim had 288 business registrations.

Manipur has no large industry, except for two units under medium sector with the rest either in micro or small sectors which are mainly in food processing or horticulture and agro based industries.

There has been tremendous improvement in the overall industrial climate of the state in the last few years which the present government claims due to government’s aggressive push for business and entrepreneurship under the Start-up scheme.

Consequent upon Prime Minister Narendra Modi’s announcement of Rs 20 lakh crores economic package aimed at uplifting the economy weakened by the nation-wide lockdown and COVID-19 pandemic, Manipur government had already distributed emergency working capital finance to 41 MSMEs on May 15.

The assistance is being provided in coordination with the State Bank of India and Punjab National Bank to enable the MSMEs to resume their normal functioning.

While distributing the emergency working capital, state chief minister N Biren Singh had observed that Manipur’s future lies on agro-based industries and MSMEs and the financial assistance in the form of loans from different banks to these enterprises to restart their normal activities would prove to be a success as repayment rate is now encouragingly high in the state.

Local to Global

Prime Minister has given a focus to the reforms envisaged in the Economic Package: he has stressed on being self-reliant and make Indian companies grow globally. This will give a boost to the MSME sector in several ways and they are expected to integrate with the national, and later global, supply chains in a much more effective way.

Rich in natural resources and talented manpower, these reforms will surely turn the present crisis into an opportunity for the country.

(PIB Feature)