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New Delhi, 28 July 2021
‘Signs of Recovery’
FOCUS ON SMALL BUSINESS
VITAL
By Dhurjati Mukherjee
There are signs of recovery on the industrial
front, according to a section of experts. If demand from new segments like
grocery and fitness equipment is pushing the e-commerce industry, preference
for personal mobility drives the automobile sector and, of course, there is the
rapid growth of the pharma industry. Demand for scooters and bikes has
increased due to fear of the pandemic and preference is not to travel in public
transport.
Certain categories led by health and hygiene
are witnessing unprecedented interest and this is expected to grow further in
the coming months. People have become conscious of health and even lower income
groups are giving special attention to this sector. The need for boosting up
immunity has witnessed increase in purchase of medicines and fitness equipment.
There can be no doubt that large companies
have shown resilience during the crisis period and have responded in a positive
manner, but the people that need to be given a thought are small businesses and
traders who are under great stress. The most significant growth is the pharma
industry, which has witnessed rapid expansion to ensure people remain safe.
Apart from vaccines, the future will also see therapeutics. All the big and
middle level pharma companies are playing a good role and will continue to do
so due to increasing demand.
In fact, India reported a doubling of profit
after tax in the last financial year despite a five per cent dip in the toe
line on the back of a lower tax rate and a sharp drop in interest cost. The State
Bank of India economic research department report has stated that around 4000
listed entities reported a five per cent decline in the top line, but their EBITDA
(earnings before interest, depreciation, taxes and amortisation) rose by 24 per
cent while their profit after tax jumped by 105 per cent.
The report also found that 15 sectors have
reduced funds by around Rs 2.1 lakh crore during the pandemic year. Plus, the
reduction in the effective tax rate in 2019-20 coupled with a prolonged period
of low interest rate regime fuelled by the corona pandemic seems to have been a
blessing for Indian industry during the year.
However, while most segments of the
industrial sector are destined to grow, the economic condition of small
business and traders are going from bad to worse. Moreover, employment
opportunities are not growing with expansion plans being virtually stopped,
resulting in economic hardships, even for a section of the middle class.
At the same time, other data collated from
various sources, specially CMIE, showed that in 2020, the salaried class took a
big hit with some professionals impacted harder than others and many
self-employed, even some of those running bigger enterprises, sliding down the
economic ladder. By the end of last year, nearly 30 per cent of salaried
workers were self-employed, engaged in petty trade or small-scale business
while 13 per cent of them were forced to move out of the workforce altogether.
Only 41 per cent were able to remain salaried over the course of the year.
Regarding small businesses, 62 per cent were
able to remain self-employed. However, for many this entailed a transition to
other kinds of self-employment with farming emerging as a pre-dominantly
fallback employment. Some of the small business owners were even found working
as street hawkers or vegetable vendors or auto rickshaw drivers.
Experts have suggested devising a micro
livelihood loan for MGNREGS cardholders. For 100 days’ work at Rs 200/day, the
cost is around Rs 1.87 lakh crore. Commercial banks can advance, say 30 per
cent of income or Rs 50,000 crore to 9.35 crore MGNREGS cardholders, all of
whom have bank accounts. The key is that the economy will get an enhanced
spending power. Assuming a marginal propensity to consume of 0.7 this should
result in a consumption boost of over Rs 1.50 trillion. This will be purely
subsistence-based and hence non-inflationary.
Another important area is giving livelihoods
for the rural poor. Government can offer loans up to, say Rs 50,000 on an
interest of say 2 or 3 per cent. Loan renewal may be linked to successful
repayment record. These loans are expected to act as big consumption booster
art subsistent levels.
As there is a great need for boosting up
demand, which is at low levels, loan off-takes may result in increasing the
purchasing capacity of the lower income sections. With the festive season
expected to start in another two months, the purchasing capacity of the masses
has to be given a boost. It can clearly be stated here that higher consumption
will not affect inflation.
In such a situation, it is encouraging to
note that the World Bank recently approved a $500 million programme to support
India’s large informal workforce, including gig workers and migrants and create
greater flexibility for States to cope with the pandemic, future climate and
disaster shocks. The latest programme builds on the $ 1.15 billion to support
schemes under the Pradhan Mantri Garib Kalyan Yojana. With the new programme
approved, States will get greater flexibility and more money in their hands to
spend for welfare of specified groups.
The larger question that government
economists and planners need to deliberate on is how can small business and
small traders be revived and nursed back to health. The help of panchayats needs
to be taken to transform the situation at the grass-root levels. The onus is
obviously on the party in power which has to take a positive stand, if they
contemplate returning back to power.
There is need to generate enough demand in
all categories -- not just essential goods and medicines -- for which the
purchasing power of the common man needs to increase. Thus, income
opportunities have to increase while small traders have to be encouraged to
diversify and/.or expand operations. Avenues for self-employment as also
opportunities for skilled employment and better opportunities for the informal
sector have to increase for which the Centre and State governments too have to
partly play an important role.
The trend towards mechanisation has, no
doubt, increased productivity and operations as also profitability but reduced
the scope of employment. Thus, there should be a broad-based national plan for
supporting labour-intensive industries in a big way across the country with
focus on more involvement of women workers, artisans, weavers etc. Moreover,
instead of focusing on GDP growth, the government should extend all types of
facilities to micro units and cottage industries in a big way, even by
extending subsidies. Inclusive growth must be the target. ---INFA
(Copyright, India
News & Feature Alliance)
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