PremiumNew Delhi: Small businesses in the contact-intensive services sector such as hospitality have suffered much more due to the coronavirus pandemic than large corporations and hence deserve special attention, NITI Aayog vice chairman Rajiv Kumar said.
Speaking at a virtual conference on sustainable growth of micro, small and medium enterprises (MSMEs) organised by Institute for Studies in Industrial Development—a think tank--and the UN Industrial Development Organisation, Kumar said that while manufacturing sector was important, services MSMEs too have their challenges and deserves special attention.
Kumar referred to the government’s recent decision of including wholesale and retail traders in the MSME category as a step taken in this regard.
“Yes manufacturing is important. But there is a large number of MSMEs in the services sector too. The recent government decision of including wholesale and retail trade as part of MSMEs is a signal in that direction that they also need modernisation and that they also face similar challenges as in the manufacturing sector," said Kumar.
Kumar said the impact of the pandemic has been hard on this sector and that one of his worries was its disproportionately higher impact on smaller businesses. “It has led to some sort of inequitable growth," said Kumar, adding that while large corporate houses have declared better results, many small firms in the contact-intensive services industry suffered. He said MSME earnings have declined by upto 50% in large segments of the sector. “A very large number of businesses have unfortunately not been able to keep pace with the changes and have folded up especially in the areas called close-contact service areas... I think they merit our attention much more going forward," said Kumar. He said services had proven to be India’s competitive advantage.
Small businesses form an important part of the economy and account for about 45% of manufacturing output, more than 40% of exports and around 30% of gross domestic product (GDP).
Kumar referred to the steps already taken to improve credit availability to the MSME sector including the emergency credit guarantee scheme offered by the government and the steps taken by the RBI. Kumar explained that 99% of the 6.3 crore MSMEs in the country were in the micro category. These micro firms were mostly proprietorships or partnerships and often did not have inventory or assets on the basis of which they could raise loans. NITI Aayog is currently working on a way of enabling credit access to these firms based on their cash flow, moving away from the practice of asset or inventory-based loans, he said.
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