April 19, 2024


Delighting finance buffs

Covid-19 impact: With low investment and labour crunch, business in Unlock 1.0 suffers as virus cases continue to surge

Bhupender Narad owns a hardware store in Chandigarh’s Sector 15. He regularly opens his store but there are no buyers. His sales have dipped as low as 10 per cent as compared to the sales before Covid-19.

“People are just buying essential items. There is no demand for non-essential items like hardware and other industrial products. Covid-19 is haunting people and they are not coming out of their houses. The situation is likely not to improve anything soon as the Covid-19 cases are rising,” Bhupender Narad, who is also the vice-president of Chandigarh Vayapar Mandal, said.

The MSMEs and business owners are complaining about poor liquidity, shortage of labour and drop in sales. Some are enthusiastic about the schemes like Covid Guaranteed Emergency Credit Line however, according to some business owners, banks are making lame excuses to avoid financing.

A Chandigarh-based MSME association named Chandigarh Udyog Vyapar Mandal Group was infuriated with bank services so much that they were forced to write to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman.

“We are getting complaints from the members that the bank branch managers are not helping them. They are denying finances without any valid reason. Some claim that they have no information about schemes like GECL. The government is making tall claims about these schemes but the banks are not letting the beneficiaries harness the benefits,” Kailash Chander Jai, Convenor of Chandigarh Udyog Vyapar Mandal Group said.

Coronavirus pandemic has come as a double whammy for the MSMEs (the majority of industries in northern India) who first lost up to 60 per cent labour force due to the mass exodus, then witnessed a drop in the demand for the industrial products.

The central government may have initiated the Unlock 1.0 but the businesses, including the industrial activity, are yet to witness normalcy. According to some industrialists in Punjab, it may take another year to revamp the business. Currently, there is neither the industrial labour, raw material nor any assurance that the finished goods will find buyers, the industrialists added.

COVID-19 affects new investments

The Covid-19 pandemic has also impacted investment in the states. Punjab received just 90 new investment proposals in the past six months as compared to 1,000 received last year.

“We are expecting new investments from the investors who have shut their units in China. The state government has announced a slew of measures to attract new investments and facilitate industrial activity. However, the focus is to open the industrial units which were shut after the coronavirus lockdown” Spokesperson of Punjab government Rajkumar Verka said.

Meanwhile, the Punjab Finance Department has estimated zero nominal growth of GSDP this year from the GSDP (RE) of Rs 5,74,760 crore during FY 2019-20 and the past trends of average TRR/GSDP growth. Punjab can expect TRR of around Rs. 62,246 crores during FY 2020-21, i.e. a shortfall of around Rs. 25,758 crores or a 29.26 per cent dip in TRR.

The new investments in neighbouring Haryana and Himachal Pradesh have also been hit by the coronavirus pandemic. Both the states had plans to woo the investors but were forced to stall following the Covid19 outbreak.

Coronavirus-induced-lockdown has already affected Himachal Pradesh’s GDP as tourism-related-activities remain suspended amid the peak tourism season. The state’s tourism sector, which contributes to 7.3 per cent to the state’s GDP, has witnessed a loss of approximately Rs 6,000 crore.

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