Government initiatives for small

enterprises in pandemic situation

Ease of doing business for MSMEs: Companies, especially the MSMEs, are
struggling to keep afloat as their business activities collapse over time. The
subsequent lockdowns have virtually shut down the businesses.

Ease of doing business for MSMEs: The Covid-19 pandemic has caused an

economic slowdown on a global scale as the markets and businesses are unable to
operate under these circumstances. Companies, especially the MSMEs, are
struggling to keep afloat as their business activities collapse over time. The
subsequent lockdowns have virtually shut down the businesses. The situation is
seen to be worsening day after day, and economists have stated that it will be tough
for small businesses to tide over this pandemic/ crisis without any assistance from
the government. The economic problems for such small companies began well in the
second quarter of this fiscal year and due to COVID-19, it has only become worse.
The government has, of course, launched various programs over the years to help
boost the economy but during such a crucial time, it is naturally a tough call to make.
On one hand, the government needs to increase its revenue collection for the
necessary boost to the economy and to reach the set goals, whereas on the other
hand, the industries could suffer heavy losses without any relaxations or waivers.

MSMEs are suffering the most due to the loan repayments, interest payments and
taxation. These can be curtailed by providing industry-specific relaxations. Recently
Prime Minister Modi had set up an Economic Task Force to assess the impact of
COVID-19 on the economy. Apart from that the banks through Indian Banks
Association have also approached RBI for relief regarding non-performing asset
(NPA) classification in the MSME sector.
As the nation’s Covid-19 patient count keeps increasing, many districts and some
states have come under complete lockdown. It has become extremely difficult for the
MSMEs to pay salary to their workers. Apart from that, MSMEs were already
struggling to repay their loans as the banks are declaring them as NPAs. The
business activities are also hindered as the global operations have suspended for
many companies and various business deals have been postponed or cancelled due
to the pandemic. This overall affects the health of the MSMEs as they are at the
bottom of the barrel but, considering that they are a significant player in the industry,
their needs should be protected.
Some of the organizations have taken initiatives to help the MSMEs themselves in
India. SBI has opened an emergency credit facility focused at MSME borrowers
affected by the Covid-19. Under the scheme the lenders can provide up to Rs 200
crore or 10 per cent of the existing fund-based working capital and such loans will be
given at a flat 7.25 per cent interest.
Other countries have already taken initiatives and started to release funds for
providing relief to all sectors in their country. Countries like Canada, Singapore, and
even UAE, have announced plans to release billions of dollars that would ease the
burden of MSMEs and salaried individuals. They have proposed extended tax filing,
loan default relaxation, and a bailout for certain sectors as well.

The Indian government has also provided some reliefs to the country as the Finance
Minister Nirmala Sitharaman announced the following measures, which may be
particularly beneficial for the MSMEs:
 Default threshold limit for triggering insolvency proceedings under the
Insolvency and Bankruptcy Code 2016 (IBC) for MSME has been increased
from the previous Rs 1 lakh to Rs 1 crore.
 Relaxation on norms for holding board meeting to 60 days, this relaxation
shall remain for the next two quarters.
 The due date for completing pending payments of central and excise duties
has been increased to June 30, 2020, without any interest or late fee.
 The due date for filing GST extended till June 30, 2020, and no late fee or
penalty will be charged for companies with turnover less than Rs 5 crore for late
filing. For those with turnover more than Rs 5 crore, only interest of 9 per cent
will be charged.
 All last dated with respect to income tax returns and filings have been moved
to June 30.
It was also announced that the ministry may consider suspending Section 7, 9 and
10 of the IBC which relate to insolvency proceedings, for a period of 10 months.
These measures do ease the burden of the MSMEs to some extent but the
government could consider:
 Special provisions for MSMEs under the GST Act to ease their burden.
 Reduction of tariffs of facilities such as electricity, water, etc.
 Interest subvention on the working capital to a percentage in order to
decrease the burden on working capital of the companies.
 A different tax slab for MSMEs under special circumstances.
 Freeze loan accounts in such extreme conditions for a period of two months
so that the accounts are not declared as NPAs.
If the government can provide these relaxations and grants, it would turn out to be a
saviour for the MSMEs, as it would help them survive the economic slowdown being
caused by the pandemic. A considerable factor in the implementation of such
provisions would be the circumstances of the economy or the nation itself. The
government must consider some of these steps to save the MSME sector.