How Hit Are MSMEs?
Summary
TLDRThe video script discusses the impact of demonetization on India's micro, small, and medium enterprises (MSMEs), focusing on the cash-dependent informal sector. Mr. Bhardwaj, Secretary General of the Federation of Indian MSMEs, highlights that nearly 80% of SMEs are affected, with the most significant impacts on sectors like handicrafts, handlooms, and carpet industries. He emphasizes the temporary nature of job losses but warns of potential long-term effects if cash shortages persist, urging for increased access to bank funds to mitigate the crisis.
Takeaways
- đ The script discusses the impact of demonetization on micro, small, and medium enterprises (MSMEs) in India, focusing on investment in plant and machinery rather than revenue.
- đ The categorization of MSMEs is based on varying investment levels, with micro enterprises being defined as having investments up to 25 lakhs in manufacturing and up to 10 lakhs in services.
- đŒ Mr. Bhardwaj, Secretary General of the Federation of Indian Micro and Small and Medium Enterprises, indicates that nearly 80% of the SME sector has been affected by demonetization.
- đ The informal sector, which makes up approximately 90% of Bhardwaj's organization's members, is particularly hard hit due to their reliance on cash transactions.
- đŒ The impact on businesses is significant, with some sectors experiencing a standstill in economic activities due to the cash crunch.
- đ Some sectors, such as handicrafts, handlooms, and carpet industries, are more affected due to their dependence on daily wage workers and cash transactions.
- đ The extent of the hit on business is difficult to quantify but is expected to be substantial, especially for those operating informally.
- đą The organized sector and those integrated with rural supply chains are comparatively less impacted, suggesting a varied impact across different segments of the SME sector.
- đ·ââïž There is a potential for significant job losses if the cash flow issue is not resolved within a few quarters, affecting daily wage workers the most.
- đ« The immediate impact seems temporary, with workers possibly sent home until the situation stabilizes, but prolonged issues could lead to long-term unemployment.
- đĄ Bhardwaj suggests that increasing the withdrawal limit from banks could help alleviate the immediate cash flow problems faced by SMEs.
Q & A
What is the primary criterion for defining micro, small, and medium enterprises (MSMEs) in the context of this discussion?
-The primary criterion for defining MSMEs in this discussion is based on the investment in plant and machinery, not on revenue or any other criteria.
What are the investment limits for micro enterprises in manufacturing and services sectors?
-For micro enterprises, the investment limit is up to 25 lakhs in the manufacturing sector and up to 10 lakhs in the services sector.
What is the investment range for small enterprises in manufacturing and services sectors?
-For small enterprises, the investment range is 25 lakhs to 5 crores in the manufacturing sector and 10 lakhs to 1 crore in the services sector.
What is the investment range for medium enterprises in manufacturing and services sectors?
-For medium enterprises, the investment range is between 5 crores and 10 crores in the manufacturing sector and between 1 and 5 crore rupees in the services sector.
How has demonetization impacted the MSME sector according to Mr. Bhardwaj?
-According to Mr. Bhardwaj, demonetization has impacted the MSME sector widely, with almost all segments affected, particularly those that are part of the informal sector and rely heavily on cash transactions.
What percentage of Mr. Bhardwaj's organization's members have been affected by demonetization?
-Approximately 80% of the members of Mr. Bhardwaj's organization have been affected by demonetization in varying degrees.
Which sectors are comparatively less impacted by demonetization?
-Sectors that are part of large supply chains and the organized sector are comparatively less impacted, as they are more integrated with formal financial systems.
What is the estimated percentage of SMEs in the informal sector according to Mr. Bhardwaj?
-According to Mr. Bhardwaj, almost 90 percent of the SMEs under his organization's umbrella are in the informal sector.
How has the demonetization affected the daily wage earners in the MSME sector?
-The daily wage earners in the MSME sector have been greatly impacted, as they may be sent on holiday due to the cash crunch, affecting their income and livelihood.
What are the potential long-term impacts of demonetization on the MSME sector if the cash shortage persists?
-If the cash shortage persists for several quarters, there could be significant job losses and a negative impact on economic growth, particularly in sectors that rely on daily wage labor.
Which sectors are most vulnerable to the immediate effects of demonetization according to the transcript?
-Sectors such as handicrafts, handlooms, glass industry, carpet industry, and others that operate on a cash basis and employ people on a daily or piece wage basis are most vulnerable to the immediate effects of demonetization.
What is the current limit for MSMEs to withdraw from banks, and what is being suggested as an improvement?
-The current limit for MSMEs to withdraw from banks is 50 thousand rupees. Mr. Bhardwaj suggests that this limit should be increased to 5 lakh rupees to help restore normalcy to daily activities.
How does Mr. Bhardwaj view the potential impact of demonetization on consumption and economic growth?
-Mr. Bhardwaj believes that demonetization could lead to a loss of opportunity in sectors where consumption cannot be postponed, which would have a bearing on economic growth.
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