MSMEs see potential return of lockdown in the future as a major challenge: UNIDO survey

By René Van Berkel
As MSMEs pan-India are in a dire must get again into enterprise submit the nation-wide COVID19 lockdown, the United Nations Industrial Development Organization (UNIDO) reached out to 85 MSMEs to take inventory of their perceived challenges, expectation and plans for restoration and revival of their enterprise.

The inventory story was taken by means of a phone survey throughout the interval of 9-13 April and included automotive parts, bicycle, paper, textile, ceramic, foundry, tea and rice milling sectors from clusters throughout the nation which are or have been working with UNIDO below any of its programmes with the Government of India (by means of Department for Promotion of Industry and Internal Trade (DPIIT), Department for Heavy Industry (DHI), Office of Development Commissioner (MSMEs) and Bureau of Energy Efficiency (BEE)).

Manufacturing India is standing idle

From the survey it emerged that common manufacturing has halted, aside from rice milling sector the place manufacturing reportedly dropped to about half of regular. In a number of sectors, together with automotive parts, MSMEs already skilled pre-lock down decline in enterprise, as a consequence of stagnating economic system and market demand and disrupted worldwide provide chains as a consequence of lock down in China. Some communication, gross sales, administrative and different assist actions are being undertaken throughout the lock-down from house, but of moderately restricted scale. Staff sources and abilities stand idle in MSMEs, and migrant workforce, notably semi and un-skilled sectors, have returned in massive numbers to their house cities. One bicycle components producer initiated and succeeded to innovate and get entangled in the manufacturing of ventilators, although solely with a small fraction of its common workforce.

Movement of supplies, together with gasoline, and other people has by and huge come to an abrupt stand-still. Manufacturing MSMEs provide nearly completely to different industries, which have additionally stopped working, ensuing throughout the board in decreased demand and cancellation of orders. Exception are important industries, nevertheless, their calls for for needed inputs from non-essential industries can’t be met, as for instance paper trade can’t meet present calls for for top of the range paper for pharma, meals and hygienic purposes. The disruption of the stream of supplies and items, is having unfavourable implications on different facets of enterprise, explicit an abrupt finish to incoming money flows and the migration of workforce throughout all talent ranges.

Re-starting is a mega-challenge
MSMEs foresee many challenges for restarting their enterprise.

  1. COVID19 will stay round and create a excessive diploma of uncertainty in all facets of the enterprise in explicit to keep away from additional unfold of COVID19 in the office or by means of the motion of folks and supplies, which can end result in additional restrictions and potential return to lock down.
  2. Upon lifting of restrictions, the market is anticipated to be very tight and very money constrained. This is basically as a consequence of excessive uncertainties with regard to demand for MSME’s merchandise (and/or potential to ship merchandise to the market) and consequent low or non-existing enterprise earnings, while bills are being incurred for labor, vitality, hire and different enterprise inputs.
  3. Manpower will probably be a constraint, with MSMEs indicating that 30 to 70% of their pre-COVID workforce might need migrated again to their hometowns due uncertainties and loss of earnings as a consequence of lock-down. It will probably be a problem to persuade employees to return or purchase new employees, and the employees changeover is anticipated to influence negatively on productiveness, high quality and defect charges, including additional to monetary issues.
  4. Machinery and shares of uncooked supplies, work in progress and closing product can have degraded. MSMEs might want to undertake excellent upkeep and repair and clear out wasted shares, earlier than they’ll resume operations, at a vital price and with possible write offs to shares at present trapped on-site.
  5. Ensuring well timed provides of important inputs with out value hikes, is of concern. Particularly these MSMEs which are critically depending on specialised components from different states or internationally specific concern on their vulnerability to produce shortages.

Forward planning has began

Even although MSMEs have began to suppose by means of potential options to the many and various startup challenges, ahead planning nonetheless seemed to be in its early phases. Many belief that their problem-solving abilities will assist them succeed to deal with the points one at a time on the go, whereas others put emphasis on their systematic problem-solving capabilities.
MSMEs have began to think about work power associated options, by means of ongoing communication with workforce (together with those that returned to their house state), establishing of buddy techniques (probably with retired staff and/or shopper technical employees), engagement with Industrial Training Institutes (ITIs) and hiring of short-term staff on walk-in foundation. To ease their monetary crunch, MSMEs have began to take a look at choices to scale back or defer less-essential bills (together with discount of shares, deferment of investments, and many others.), to safe earnings (together with excellent dues from patrons, notably authorities and Public Sector Undertakings (PSUs)), to entry extra working capital (by means of low curiosity loans and/or from retained earnings) and/or to attraction for presidency fiscal and/or monetary assist.

Keeping protected with COVID19

Several MSMEs had already began pre-lockdown with some COVID19 measures for an infection prevention and management, notably by means of consciousness and communication (on hygiene, social distancing, and many others.) and in some instances provision of hand sanitizers, masks and gloves. This types the foundation for stepping up preventive measures submit lock-down, for which MSMEs are authorities for particular steering. Common measures into account are well being checks at manufacturing unit entrance, provision of Personal Protective Equipment (PPEs), staggering of shift and break occasions to reduce congestion of folks, keep social distancing throughout work and obligatory use of Aarogya Setu software.

Few MSMEs are contemplating additional measures such as set up of sanitization tunnels, pre-start up fumigation of manufacturing unit premises and rearrangement of work stations to take care of social distancing. A share of MSMEs anticipate that they might want to scale back and even halve employees numbers and preserve guests out and will must make various preparations for offering meals and drinks whereas in attendance. There is a normal apprehension that the future new regular will probably be totally different from what it was once in the previous. Moreover, the time required to attain some normalcy will probably be vital, with minimal estimates various between some 6 weeks to six months. This will closely rely upon the how the COVID19 pandemic unfolds in India and globally in coming weeks as properly as coverage responses and stimulus packages.

Overcoming the money crunch

The most fast concern at present on the minds of MSMEs are money stream and dealing capital. Most are involved that survival is just doable with a substantive monetary and/or fiscal assist package deal from authorities particular to MSME phase. Some MSMEs imagine simply a monetary stimulus will probably be sufficient, but others are recognizing that COVID19 is a wake-up name to alter and enhance totally different facets of MSME operations as properly as the MSME ecosystem and the worth chains they’re half of.

The author is UNIDO Representative, Regional Office (India)

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