In distress, MSMEs and middle class cry for help
The Tamil Nadu chief minister, M.K. Stalin’s idea of mobilising opinion among his 12 counterparts in non-BJP states to demonstrate collective strength in pressing for a loan moratorium for MSMEs (ministry of micro, small and medium enterprises) has a sound base in the current economic situation. The call may also be seen as a shrewd one at a time when the political winds blew in one direction so hard that a crucial change in the public vaccine procurement and disbursement policy was thrust upon the Centre with free vaccination on offer for all Indian adults. The top court’s ominous warning that the Constitution does not envisage courts to be silent spectators when executive policies infringe upon citizens’ rights, which was a reference to the invidious nature of the vaccine policy that tended to discriminate against citizens under 45, may have had everything to do with the Centre resiling.
The decision to change tack may have signalled that collective pressure could make the executive see reason, particularly when all the arguments in favour of a particular public policy direction were seen to be logical. While a united stand among the Opposition on national issues is to be welcomed, the current state of the economy, which is again on a steep downslide after a second lockdown in the face of the Covid-19 pandemic, is reason enough to take up the cause of the struggling middle class hit by regional lockdowns covering major parts of the country. Not impervious to the existing conditions, the Reserve Bank had also opened up a $31,000 crore tap for MSMEs, as aid mainly for contactintensive sectors, including hotels and restaurants tourism, aviation ancillaries and several others badly impacted by the pandemic.
The point is, much more can be done to alleviate the economic distress. A loan moratorium, particularly for small-sized ones like `5 crores that is the lifeblood of MSMEs that generate a huge number of jobs, would work well. In principle, it is not loan truancy but a mere granting of time to tide over as the economy recovers in the wake of the second pandemic wave subsiding in India. The RBI extended a special liquidity facility of `16,000 crores to Small Industry Development Bank (SIDBI) besides facilities for banks to park matching funds at 40 basis points higher than the reverse repo rate. Even then, the economic pain has been running so deep in the second lockdown that extraordinary measures are still needed.
Recovering as it is from a very low base, the economy is bound to grow in the coming quarters though the forecasts factoring in the deleterious effects of the lockdown are tending to get lower, even as low as 8.5 per cent by the World Bank. However, the projected growth trajectory might hide the suffering of the last several quarters, beginning with April 2020. There is no better time than now to come to the help of small industries across sectors most hit by the slowdown and the middle class burdened by housing EMIs, etc. Radical measures like generous printing of notes has also been recommended, which the RBI and official India, hemmed in by having to think within the box, would be wary of. The economic distress is, however, very real and only doles, grants and loan moratoriums can do something to assuage the economic hurt.
A loan moratorium,
particularly for small-sized ones like `5 crores that is the lifeblood of MSMEs that generate a huge number of jobs, would work well