STILL IN DIRE STRAITS

SLUMPED DEMAND, RISING RAW MATERIAL COSTS AND SOARING TRANSPORTATION CHARGES HAVE HIT MSMEs HARD, LEAVING MANY ON THE BRINK OF BANKRUPTCY

- M.G. ARUN

Sunil Kumar, 51, a Mumbai-based smallscale manufacturer and exporter of metal fittings for the housing sector, is a concerned man. Despite the economy opening up to a large degree, demand for his products remains sluggish. Exports to nations in the Middle East, his mainstay for several years, are down by half this year, with no sign of picking up. At the same time, input costs—especially steel prices—have risen fourfold compared to pre-pandemic rates, while shipping costs have more than doubled. “No one has certainty about anything, be it the pandemic, the business environment or government policies,” says a distraught Kumar, who hopes the festive season will lead to an improvement in demand.

There are hundreds of thousands of entrepreneurs like Kumar, who have pinned their business hopes on the reopening of the economy as Covid vaccinations increase and case numbers fall. While large companies have been able to survive the pandemic and even improve profit margins by cutting costs—reflected in the rebounding of GDP growth to 20 per cent in the quarter that ended in June, albeit on a very low base—firms in the MSME (micro, small and medium scale enterprises) sector are still struggling to get out of the red. Many say that without a revival in the MSME sector, which is often described as the backbone of Indian manufacturing, economic growth will not be sustainable. As a result of its size, the sector has a major impact on overall investments and in consumption, both of which lagged in the April-June quarter.