'The Scroll's claim that government “wrecked small businesses” is too sweeping in nature
There is enough hard evidence to believe that the Government has been doing a lot for the sector
An article in The Scroll (later republished by Quartz India) with the headline ' Demonetisation, GST and lockdown: How the Modi government has wrecked India’s small businesses’ portrays a gloomy picture of the situation of this crucial sector of the Indian economy.
It, however, does not present a very accurate picture on several counts.
The article published on November 28 makes three key points:
1. One of the first hurdles that were erected on the tracks of the small business was demonetisation.
2. The unorganised sector had hardly found their footing back in the race when yet another hurdle was erected on their track, this time in the name of Goods and Services Tax.
3. The unorganised sector was desperately trying to get back on its feet when in 2020 yet another hurdle was put on their tracks. This time even a deadlier one that knocked them down—the covid-19 lockdown.
To be fair, demonetisation did lead to confusion and inconvenience in the initial weeks. But as with most radical policy measures, the situation then began improving gradually.
As for the Goods and Services Tax, the rationale for introducing it has been largely borne out by the increase in the tax base.
“In the last four years, our tax base has almost doubled from 66.25 lakh to 1.28 crore. For eight in a row, GST revenues have crossed Rs 1 lakh crore and we have seen record collection of Rs 1.41 lakh crore in April,” the minister said in a written message. “The enhanced revenue collection in recent months should be the ‘new normal’, Union Finance Minister Nirmala Sitharaman was quoted as saying by The Hindu on July 1 this year.
This article, however, will focus on the third point, the lockdown. This is the most recent development and something that has been a matter of much debate since March 2020.
A little bit of perspective is needed here. The government did not announce the lockdown on a whim. It was done on the basis of inputs from top scientific advisors and health experts who believed this was an effective way of stopping, or at least slowing down, the spread of Covid-19.
More importantly, there is enough hard evidence all around to show that the government has been doing a lot for small business - the micro, small and medium enterprise (MSME) sector - after the Covid-19 induced lockdown.
According to a report in the Business Standard, the Centre is mulling providing help to the micro, small and medium enterprises which were closed during the COVID-19 pandemic.
The report, published on Saturday (November 27), quotes Union Minister for MSMEs Narayan Rane as saying that restarting closed factories will create jobs and raise production and the GDP.
Asked about the closure of factories and problems faced by other industries during the pandemic, Rane said, "Our government is contemplating to help the micro, small and medium industries that were closed during the Corona period," the Business Standard reported.
"I had raised this issue with Prime Minister Narendra Modi and we have had a meeting regarding this. We will help them and get the closed factories resume (operations)," he added, according to the report.
Read the Business Standard report here
In September, the Centre had announced an extension of its Emergency Credit Line Guarantee Scheme (ECLGS) till 31 March, 2022, or till guarantees for an amount of ₹4.5 lakh crore are issued under the scheme, whichever is earlier.
According to a Livemint report on September 29, the Ministry of Finance also announced that the date of disbursement under the scheme has also been extended to 30 June, 2022.
“The modification introduced would ensure that businesses adversely impacted by the second wave of COVID -19 get enhanced collateral free liquidity. Further this provides much needed support to all the ECLGS borrowers (which mainly consist of MSME units) in time for the busy / festival season," the ministry further added.
Read the complete report in Livemint
This is not all. According to the Financial Express, the Modi government’s Emergency Credit Line Guarantee Scheme (ECLGS) has so far sanctioned 64.4 per cent of the total scheme limit of Rs 4.5 lakh crore that was extended from Rs 3 lakh crore in June this year.
"This is up from over Rs 2.86 lakh crore loans sanctioned as of September 24, 2021, to over 1.15 crore borrowers. Also over 95 per cent of the guarantees under the scheme were for MSMEs, Finance Ministry had said in a statement in September," the Financial Express reported.
Read the full Financial Express report here
In August this year, Finance Minister Nirmala Sitharaman had launched a new fund for MSMEs, the ''Ubharte Sitaare Fund''.
According to a report in Business Today, Sitharaman had described the micro, small and medium enterprises (MSMEs) as the backbone of the economy.
"In the last two years, the Centre has done a number of different things. The government has changed the definition of MSME in a very flexible manner. Recently, a bill was tabled in the Parliament through which the MSME sector will directly benefit," she said, according to the Business Today report on August 22
The ''Ubharte Sitaare Fund'' has been set up by Exim Bank and SIDBI.
The fund is expected to identify Indian enterprises with potential advantages by way of technology, products or processes along with export potential, but which are currently underperforming or unable to tap their latent potential to grow, the Business Today reported.
Read the full report by Business Today
So, while it is true that small businesses were hit by the lockdown – as were most other businesses – the steps taken by the government subsequently have helped many of them get back on their feet.