In the event that the government decides to directly aid workers in micro-businesses or provide a separate set of relief measures for, say, self-employed/owner-managed enterprises, it will have to first figure out a way to ensure that the relief reaches its target. So far, the government’s efforts in this regard have yielded less consequential success.
What this has done is taken the MSMEs, especially the smaller firms, to their breaking point. Being unable to survive the crisis is leading more micro and small firms to go out of business, which has spillover effects on employment, rendering thousands of workers jobless overnight.
It is critical to note that while tax cuts may be necessary for larger businesses, which help them expand profitability (if not wages), such fiscal measures tend to exclude the ‘informal’ MSME sector where employment and turnover will not meet the minimum thresholds required to pay income tax or to be registered under the GST.
Relief for unorganised MSMEs occupying informal workers, plus tiny micro-enterprises with five to 10 workers, will need to be targeted such that it reaches them in time to save their lives and livelihoods.
The Union government will need to collaborate with manufacturing and retail trade associations, in all its size and forms, while diverging from the big capital-state nexus that has been shaping the macro-business, finance and capital market base in India for some time now. Lessons from the poor implementation of existing government schemes and the incompetence reflected in not being able to ‘identify’ or ‘help’ firms in desperate need of cash during crises must enable permanent structures that support the unorganised MSME, the lifeline of India’s manufacturing and employment landscape.
(Deepanshu Mohan is Associate Professor and Director, Centre for New Economics Studies, Jindal School of Liberal Arts and Humanities, OP Jindal Global University. He is Visiting Professor of Economics to Department of Economics, Carleton University, Ottawa, Canada. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)