A string of economic, policy and structural changes over the last 3 years have dealt a hammer blow to millions of small businesses across the country. Coronavirus may be the death knell.
The tremor demonetization of 2016, the haphazard execution of GST and the liquidity crisis that followed the collapse of IL&FS meant MSMEs across the country were struggling. What more could have gone wrong? It seems the worst was yet to come.
Covid 19 is an infectious disease that leads the country to go under lockdown – this sheer timing of the worldwide pandemic could not have been worst for millions of small businesses. Perhaps, the segment that gets impacted the most during any turmoil is the food and business industry.
FOOD AND BUSINESS INDUSTRY
There is no full-scale lockdown in India, but the food and business industry are already in distress. For example, denial of the input tax credit on the GST as well as no concrete policies in the online business in food. While they were dealing with all this, coronavirus came and created an almost existential crisis for them. The proportion of fixed operating assets is frightfully high and with the kind of revenue reduction, the mall outlets have shut down and standalone are probably working at 60% to 70% lesser number then what they would normally do.
AUTO SECTOR
An additional sector that is in ominous straits is the automotive sector. The auto sector plays on gushes and the current circumstances have made things even tougher for the sector. Automotive components manufacturers association of India, the auto industry has been facing many upheavals lately and the coronavirus scare has only added to segment’s woes.
While the difficulties looked by the business aren't only alone due to coronavirus, yet this one is coming at a point when the business has been thinking about different issues. Month-on-month deals have been dropping, and the business has been at the same time progressing from BS-IV to BS-VI. In this way, every one of these elements makes this emergency a test.
The auto business is experiencing its most noticeably awful stoppage for a year at this point and trusts in a turnaround this year has immediately failed. The log jam popular had prompted complete discount vehicle deals in the nation declining by somewhat over 19% during the long stretch of February 2020. In any case, things are relied upon to deteriorate for the period of March, which is required to see the full effect of Covid-19 play out.
BLANK SAILING
There is definitely a loss of confidence among Indian MSME’s and the manufacturing industry India at large would bear the brunt. The crisis is now across the value chain and out only due to shortages of material supplies, but also due to restrictions put in place across the globe. Shipment and carriage have a prevalent exposure to the universal strike induced by a coronavirus. Transportation undoubtedly is impacted as an upshot of the outbreak where clearances of containers have not taken place smoothly at various ports. Such put large pressure on the availability of containers for movements and they do see a lot of blank sailing.
CONCLUSION
These are the unchartered waters for every business and the most can only hazard a guess on how things will play out. The entire concept of quarantine and a large section of the working populace working remotely shows a paradigm shift in how a business needs to operate. If this would lead to permanent behavioral changes, which in turn has an impact on shape of the economy? It is certainly not good news for the economy in general, and MSME’S in particular. They are more vulnerable to shocks on our worry is that the current crisis could lead to an exodus of workers to their rural roots, bringing the economic engine to grinding halt.
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