The surge of Covid-19 affected many businesses in different ways never witnessed before. The crisis forced most large, medium-sized, and small-sized businesses to make adjustments. Large companies and few middle-sized companies are even able to manage during the pandemic as they have the advantage of evolving opportunities. However, it is not the case for all. The future is very uncertain especially for the small firms, it is quite likely that the businesses will fall. The large organization has its strong financial muscle to back them up which makes it easier for them to pass through such a crisis. Survival has today become a focus area for various SME’s.
According to the Annual Report of the Department of MSMEs in 2018-19, there are around 6.34 crore Medium, Small, and Micro-enterprises in the country, Out of this 51% are situated in rural areas and provide employment to over 11 crore people. But around 55% of employment happens in Urban MSMEs.
MSMEs were already struggling for their presence with problems like GST, lack of financing, bank loans, and many more. Now, total lockdown had raised a question mark to their existence because small firms do not have cash reserves to wait out the crisis. That results in job loss, mainly for the labor class as businesses remain closed for almost four months.
Let’s take an example!
DST Tech Pvt Ltd. in Haryana Bahadurgarh manufacture a hand-free flushing toilet system in his factory where everything is done from polishing to electro-plating and mirror finishing. They have a major deal for selling these components to Sloan, American manufacturing of commercial plumbing systems. Their export demands rise whenever there is a decrease in the demand for other architectural hardware such as tap handles. The half-an-acre factory used to do electroplating for 200,000 tap handles pre-COVID, now the demand has revived to 30%. Therefore, they have cut down their employees to 60%. Sandeep Tandon, owner of DST tech said that “if the situation continues to grim, people are not buying. I’m worried how will we come out of it. I had no other option than sending people on leave. If you don’t have work, you can not maintain 100% employment in your factory.” It is a small company with a revenue of approx Rs. 15 crores a year.
“Even the large customers are delaying the payment”, Sandeep added. Delaying in the payment schedule which actually leads to working capital crunch. Working capital loans are not even easy for such small companies. Post-pandemic revenue generation is beating slowly along with the capital crunch, and low availabilities of labor, the situation of Indian small firms are getting very serious.
According to Crisil Ltd, an analytics company, have observed that MSMEs sector revenue growth will be plunging to 17-21% in 2020-21.
During the pandemic, the worst-hit sectors are construction and real estate, gems and jewelry, textile, and ceramic. The small companies are the backbone for the middle-class and labor class people. Therefore, if small companies started to shut down, it will exacerbate the supply side of the value chain of India. While the economy is dealing with large problems, these shut down may bring a major impact on the economy and employment.
Meanwhile, the Government is launching various schemes to strengthen small companies. For example, the change in the definition of turnover (medium companies have revived upward from Rs.5 crore turnover to Rs. 250 crores). As a result, it makes it easier for small companies to get working capital loans.
Let’s take a look at another example, a Surat-based Jewellery workshop – Jagdish Jain, who is worried as his already ready-made diamond and gold jewelry is lying at the workshop unsold. The business is at hold as there are no marriages, existing dealers are not taking jewelry due to stop. Meanwhile, the retail demand is under pressure due to the rise in prices. At the current time, when everyone has tightened pockets the demand for jewelry purchase have fallen. Thus make the business at hold, in result the cut down in employment.
If the current situation continues for the year, it would be really tough for small firms. If there is no demand, how the businesses will survive? If the businesses will shut down, how the people will survive? What will happen to the workers and laborers?
We have to put a step forward in our own ways. It is a time where everyone got to help each other! From business to personal support.