Sonia Gandhi
Sonia Gandhi|IANS (File photo)
Business & Economy

Sonia Gandhi says crisis in MSME sector could have devastating effect on economy

NetIndian News Network

New Delhi, April 25, 2020

Congress President Sonia Gandhi today wrote to Prime Minister Narendra Modi drawing his attention to the crisis facing the Micro, Small and Medium Scale Enterprises (MSMEs) due to the lockdown imposed to contain the spread of the coronavirus (COVID-19) pandemic and said that, if ignored, the issue had the potential of having a devastating and expansive ripple effect on the country's economy.

"The last five weeks have brought our nation face to face with several challenges. As we continue our fight against COVID-19, I felt it essential to highlight an economic oncern that needs immediate attention and intervention," she said.

Gandhi said the MSME sector contributed close to one-third of the nation's GDP and account for almost 50% of the country's exports. They employ over 11 crore people.

"At this moment, without appropriate support, more than 6.3 MSMEs stand on the verge of economic ruin," she said.

The Congress President said that every single day of the lockdown, in force since March 25, came at a cost of Rs 30,000 crore to the sector.

"Nearly all MSMEs have lost sales orders, seen a complete cessation of their work, and have had their revenue negatively impacted by the lockdown. Most worrying of all, the 11 crore employees mentioned in the preceding paragraph are risk of losing their jobs as MSMEs struggle to pay their wages and salaries. The Government needs to introduce a series of measures to meet this crisis head on or risk a much larger economic crisis down the road," she said.

To this end, Gandhi offered some suggestions, including a Rs 1 lakh crore "MSME Wage Protection" package that, she said, would go a long way in shoring up these jobs, boosting morale as well as greatly alleviating the predicted economic spiral.

She also called for the establishment and deployment of a credit guarantee fund of Rs 1 lakh crore which was necessary to provide immediate liquidity to the sector and ensure adequate capital is available to MSMEs at a time when they need it the most.

The letter said actions taken by the Reserve Bank of India (RBI) must get reflected in actions by commercial banks to ensure adequate, easy and timely credit supply to MSMEs.

"Furthermore, any monetary action at the RBI's end must be supported by sound fiscal support from the Government. A 24x7 helpline in the Ministry to provide guidance and to assist MSMEs during this period would also be of enormous value," it said.

Gandhi said these measures need to be supported by an expansion and extension of the RBI's moratorium on payment of loans for MSME beyond the stipulated period of three months. The Government should also explore a waiver/reduction of taxes for MSMEs and other sector-specific measures, she said.

She said high collateral security was leading to denial of credit. "Same is the case with limits of 'margin money' being extremely high. These factors combine to ensure a lack of access to available credit for MSMEs and msut be addressed," she said.

"Government has acknowedged MSMEs to be the backbone of our economy. It is time it takes measues to ensure the revival and strengthening of that backbone. This is a case where timely and decisive action can make all the difference," she added.