The micro, small and medium enterprises (MSME) sector faces an existential crisis due to acute shortage of revenue, according to ratings agency Crisil.
Latest data suggests revenue growth will plunge into deep negative territory this fiscal because of the Covid-19 pandemic.
Across the country, the deadly pandemic has hit consumer discretionary, construction and export-linked MSMEs — all of these businesses have been impacted due to a sharp dip in domestic consumption and a sloppy supply chain.
It may be noted that the government had announced Rs 3 lakh crore emergency credit line for micro, small and medium enterprises (MSMEs). However, Crisil data suggested that the government’s emergency loan scheme for MSMEs may not be enough to boost their prospects.
Apart from MSMEs, entrepreneurs from key sectors have witnessed a varied pace of revival those most affected do not expect a rebound before the next fiscal, while a few are optimistic about the upcoming festive season.
The country has seen overall demand fall by 80-85 per cent across segments due to the coronavirus pandemic. Investment has also taken a backseat due to the prolonged lockdown period.
Meanwhile, some of the sectors that have been deeply affected by the pandemic include real estate and auto.
The real estate sector has is facing several hiccups as uncertainties have jumped sharply due to the lockdown. Projects have been delayed, buyers are preferring advanced-stage projects instead of those under construction.
The sector is also reeling under pressure due to an acute shortage of labour, following the mass exodus of migrant workers from cities.
Construction is highly labour-intensive and real estate projects are suffering due to non-availability.
It is worth mentioning that non-local labour constitutes 65-75 per cent of the workforce in typical projects.
Majority of builders expect an increase in labour cost or per day wages to increase by 3 to 5 per cent
At least 42 per cent of the developers plan to hire additional labour gangs and 43 per cent plan to allow gangs to work in shifts, maintaining social distancing.
But builders’ plans may face additional snags because minimum assured wages will result in labourers unwilling to travel far from their homes; this could put developers in a tricky situation.
The outlook of the auto sector has also slumped drastically in the wake of the coronavirus crisis.
Muted demand and uncertainty have worsened auto dealers’ woes.
According to fresh data, the auto sector saw an increase in sales because it was fuelled by panic-buying in March. But, in May, sales of distributors operating in red and orange zones saw sales plunge drastically; small enterprises saw a sharper decline in the month.
The auto industry is now slowly adapting to the new circumstances and moving gradually towards digital sales.
Most of the passenger vehicle dealers have already adopted this model. Two-wheelers sales are taking place through websites such as Bikewale, Bikedekho and Just Dial while passenger vehicles are being sold through websites such as Carwale, Cardekho and Acko.
While dealers are using digital platforms to sell passenger vehicles and two-wheelers, only 9 per cent of commercial vehicles are being sold through the digital mode.
While the growth trajectory for this year has already been impacted by the coronavirus pandemic and the prolonged lockdown, markets are optimistic before next year.
Players catering to the domestic market expect a recovery in the third quarter of fiscal 2021, due to likely demand uptick in the festive season.
Branded players are optimistic about recovering by the fourth quarter as they have more online visibility compared with non-branded players.
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