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Dip in jobs, profits for MSMEs; noteban, GST to blame: Survey

While job loss was reported at the rate of 43% in the trader segment, micro-segments reported job losses of 32%, small segments reported 35% and medium-scale industries reported 24% job losses.

Written by Arun Janardhanan | Chennai |
Updated: December 17, 2018 10:11:27 am
A worker fixing a board prior to a protest by Congress party at Azad Maidan in Mumbai on the first anniversary day of demonetisation. (Source: Express Photo by Nirmal Harindran. 08.11.2017)

Traders and micro, small and medium enterprises (MSMEs) across the country have reported steady job loss and declining profits since 2014 and demonetisation, the roll-out of GST are among the reasons for the slowdown, according to a new survey by the All India Manufacturers’ Organisation (AIMO).

The AIMO survey, which analysed 34,700 samples from traders and MSMEs across the country revealed that these sectors suffered major setbacks in terms of its performance on various business aspects since 2014. The AIMO represents over 3 lakh micro, small-scale, and medium and large scale industries engaged in manufacturing and export activities.

While job loss was reported at the rate of 43% in the trader segment, micro-segments reported job losses of 32%, small segments reported 35% and medium-scale industries reported 24% job losses.

The survey, according to the AIMO raises several red flags about the critical condition of traders and MSMEs and should serve as a reminder to the Centre of the need for its attention “with a lot more seriousness and urgency” to revive the sector. K E Raghunathan, president of AIMO, told The Indian Express that the survey reveals that the operational profits of traders across the country have dropped drastically by about 70% since 2014.

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“Micro industries show a 43% drop in operational profits, small-scale industries report a dip of 35% and medium scale industries faced a drop of 24%. This is huge, this deserves immediate attention as many sectors within these traders and MSMEs have already gone down beyond a revival,” he said.

According to the survey – it involved interviews assessing the status of Indian industrial and business sectors with different stakeholders – Raghunathan said, 2015-16 saw growth in all areas of business due to high sentiments and expectations from the new leadership (NDA government).

“It went down next year due to demonetisation. The rollout of GST, due to finance availability and higher outstanding with government payments and compliance matters all worsened these sectors in the next three years,” he said.

The survey looked at the performance of traders and MSMEs since 2014 to assess the growth factor of industries during a period when the government had come out with several schemes, policy changes and assistance for the industries.

“We have done this study in the background of having ‘Make In India’, ‘Skill India’, ‘Digital India’, ‘Start Up India’ campaigns, demonetisation, GST implementation and tax laws, change in the classification of MSMEs, growing NPA phenomenon and the entry of foreign-owned business models such as Ola, Uber, Flipkart and Amazon,” he said.

“We have used about 34,000 samples from traders, manufacturing, service and export sectors and from professionals and trade bodies for this study mainly from major MSME clusters in Punjab, Haryana, Tamil Nadu, Karnataka, Maharashtra, Hyderabad, Assam, West Bengal and Kerala.”

The survey on jobs, keeping the industry status in 2014-15 as the base, shows that the trade sector which had 100 employees has now reduced to 57 by 2018-19. The survey shows that the trade sector suffered a set back with demonetisation although it had a significant progress, up to 106 %, in 2015-16. “But after demonetisation, the survey shows a dip in the job creation in traders’ segment to 86% in 2016-17, 83% in 2017-18 and 76 % in 2018-19. Similarly, small-scale industries were the worst affected. A steady rise of job creation in 2015-16, up to 115%, faced a set back later by dipping to 78%, 71% and 65 % in the next three years, a worsening trend attributed to demonetisation and GST,” Raghunathan said.

Pointing to some suggestions the AIMO has made, Raghunathan said that the supply of raw materials such as steel, aluminium at lower subsidised cost to MSMEs, reduced interest rate for short term and long term finance, higher reservation of procurement in government purchases from MSME are some of the basic corrective steps to be taken by the government immediately.

While traders reported that profitability, sales and sourcing funds are the major challenges, micro industries said that profitability, sourcing funds and raw material costs were theirs. Government documentation, profitability, sourcing funds, availing incentives such as subsidies were among the major challenges faced by small and medium scale industries.

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