Without ancilliary services, MSMEs can't resume operations even after April 20

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While the government plans to assess the COVID-19 situation by April 20 before allowing industries to function in certain areas, the step is unlikely to help revive business operations, industry leaders say.

"Even if industries are allowed to function in some areas, allowing manufacturing in certain areas in isolation will not help matters. A factory cannot be opened unless all the accompanying services such as courier and transport among other services are allowed," says Anil Bhardwaj, Secretary-General, Federation of Indian Micro, Small and Medium Enterprises (FISME).

With around 63.4 million units across India, MSMEs contribute around 6.11 percent of the manufacturing GDP and 24.63 percent of the GDP from service activities as well as 33.4 percent of India's manufacturing output.

The 21-day lockdown announced on March 23 has led to huge losses for MSMEs, affecting their survival. While the partial lifting of the lockdown may help certain industries resume operations, piled up inventory may be an issue.

According to Bhardwaj, more than Rs 35 lakh crore worth of goods of MSMEs are stuck on the road, which include both essential and non-essential products.

"Demand has taken a beating due to the lockdown. It may take several months to a year to receive the same level of demand," says Bhardwaj.

Meanwhile, the government has issued a three-month moratorium over loans. However, industry experts believe it may take more than 6 months for MSMEs to get back on track.

MSMEs provide employment to around 120 million people. Once operations resume, there will be issues with the sustainability of MSMEs leading to a large number of layoffs, according to a report by KPMG.

Given the impact on the global and Indian economy, the overall level of business of MSMEs may reduce in the next 9 to 12 months.