MSMEs face existential crisis, FICCI cautions Government

FICCI (Federation of Indian Chambers of Commerce and Industry) has cautioned the government that if cash flow problem continues unabated, MSMEs may not survive.  If the lockdown enforced by the government continues, MSMEs are poised to face an existential crisis.

Industry body on FICCI suggested the government a repository of measures including earliest clearing of dues and payments to MSMEs including GST, interest rate subvention at 3 per cent for healthy loans, not NPAs.

In a report on challenges and suggestions to fight COVID-19, FICCI said, “It is extremely important to ensure the flow of money into the working capital of such enterprises otherwise there will be a risk to the survival of these enterprises. According to the annual report of MSME Ministry, India is host to 6.33 crore MSMEs out of which 6.30 crore micro-enterprises.

In a similar plea, ASSOCHAM had advised for several steps to support SMEs including concessional working capital loans and concessional finance.

Domestic industries are prone to enter a slowdown due to deficiency of strong fiscal stimulus. In the medium to long term, this will have a strong negative impact on the export capabilities of India. To surge over the challenge of working capital, FICCI has also asked for MSMEs receivables from the government or third parties to be transformed into “one-year commercial paper to be subscribed by banks under special refinancing window of RBI”.

Other key suggestions include cash grants, wage subsidy up to 50 percent for all registered workers for nine months, and automatic renewal of “credit limit sanction being processed from March onwards” for a year without any change in commercial terms. FICCI has also requested SEBI to ask rating agencies not to downgrade SME sector from March onwards. It also requested to reinstate those downgraded by one step to the ratings before the COVID-19 outbreak.

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