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Interview | Rs 6.9 lakh cr sitting idle in banks can be given to stressed MSMEs: Niranjan Hiranandani

Ease of Doing Business for MSMEs: "Many small companies would find it difficult to sustain and repay the bank loans even after the moratorium comes to an end."

Ease of Doing Business for MSMEs: Indian MSMEs have been a resilient lot. After the problems faced due to the demonetisation and GST, Indian small businesses have remained steadfast in overcoming the current Covid and lockdown-induced challenges. So much so that majority are confident in recovering back to pre-Covid level by end of this year itself. And these are beyond over 50 lakh MSMEs, which the government envisaged, to be benefitted under various sub-scheme of the Atmanirbhar campaign such as the emergency credit scheme, EPF support, subordinate debt etc. “However, the magnitude of the losses is so huge that whatever you do seems inadequate at this stage,” Dr Niranjan Hiranandani, President, Assocham and Co-founder & MD, Hiranandani Group told Financial Express Online in an interview. Edited excerpts below:

The government of India like the governments all across the world have taken a lot of measures to revive the economy and arrest job losses. However, the magnitude of the losses is so huge that whatever you do seems inadequate at this stage. The 23.9 per cent contraction that we witnessed was the result of the same and was in the expected lines. A bulk of the measures is aimed at MSMEs which are considered to be the backbone of the economy. The Reserve Bank of India has been proactive in its steps to boost liquidity in the system to help out the small business units. We are hopeful that the effect of these measures would be seen in the subsequent quarters in the coming year. However, most of the measures are aimed at addressing the supply side of the problem. The government needs to take some steps to address the demand side of the issue as well. Many companies in sectors like aviation, tourism, and hospitality are finding it difficult to sustain and may even shut their business operations if things continue in a similar manner.

How do you see the government’s push for Atmanirbhar Bharat benefitting MSMEs?

The central government’s call on the journey towards self-reliance or Aatmanirbhar Bharat was well-received by the Indian entrepreneurs. Many local brands have taken the opportunity to reach out to global markets. Companies who had to stop their operations have diversified into other businesses. So, today we have vehicle manufacturers who are making lifesaving ventilators and are supplying them to hospitals to save lives, and liquor manufacturing companies are making sanitizers. Before the lockdown, we were dependent on countries like China for the import of basic life-saving kits. Today we have hundreds of smaller business units who are into manufacturing and even exporting to other countries. During the lockdown, Indian pharmaceutical companies also took a lead and exported several life-saving drugs to many developed countries.

Do you think the banking sector has ably supported MSMEs?

The RBI has taken a lot of initiatives to provide easy access to credit to the MSME sector since March. Right from reducing the key interest rates, to loan restructuring to announcing a moratorium, RBI has made an honest attempt to bail out the MSME. However, the magnitude of the crises is such that there are many small companies that would find it difficult to sustain and repay the bank loans even after the moratorium comes to an end. We could expect the bank NPAs to go up unless there is a revival in demand.

The central bank also has a delicate role to balance access to easier credit and also protecting the banks from closing business. They can only offer direction to banks to provide credit at a certain rate; however, they can’t force any banks to provide loans at a certain rate and bear losses. Banks too at the moment are facing challenges of their loan recovery. There are several things that the government needs to do at this stage. Firstly, ensure that the liquidity measures are percolated down to these small businesses. Secondly, there is almost Rs 6.9 lakh crore lying idle with banks as a part of their reserve measure which can be given to the stressed MSME sectors.


It’s not just India, but countries all across the world which were dependent on China in some way or the other, the Covid crises has just changed that. India has the capacity to switch to domestic alternatives in almost 40 different sectors. The government of India in the last few months has also made several policy changes and opened up many key sectors. This would attract investments and impact costs. India has already started scouting alternative suppliers for the potential replacement market to China to bridge the gap due to the breakdown in the supply chain. The Atmanirmbar Bharat initiative taken by the government will enable component makers to become self-reliant, however, it will take some time. I personally believe that there would be some price fluctuations in the short run, but in the long run, prices would be much stable.

The government since the last many years has been proactive and promoting several initiatives like the Make in India, Digital India, and Skill India. All these initiatives are actually showing results now in the country’s journey towards self-reliance. These concepts were always there. India Inc has been operating and achieving a lot of efficiencies due to digitalization. Several sectors like Banking and IT were operating at 80-90 per cent of the efficiency even during the lockdown. Other initiatives like Fit India Movement launched last year or the programs taken by the Ministry of Ayush to promote Yoga have resulted in a positive impact during the pandemic. People have realized the importance of health and wellness which has raised their immunity.

The government of India too, on the other hand through its policy and tax reforms is steadfast in promoting Indian entrepreneurs, MSMEs to turn ‘Make in India’ into a success. India is also positioning itself as a global hub of manufacturing by inviting multinational companies to set shop by providing incentives and offering them ready land and developed infrastructure and also working on the notion of Ease of Doing Business by removing bottlenecks wherever possible.

To what extent the govt’s efforts towards boosting startups have shown desired results?

The present Covid situation has had a mixed kind of impact on the startups in the country. While the entrepreneurs in sectors like travel and tourism, aviation, textiles, and the auto sector have seen a substantial drop in their revenue, there are segments like education and health and wellness which have seen a substantial rise in their business. The key here is a readiness to adopt newer technology or a willingness to diversify into similar businesses. India is in an advantageous position today and has taken a lead in several segments including pharma. It offers a ready market for companies wanting to shift their base in the country. Startups can offer value-added service to these companies with customized solutions. Also, the government of India has opened up several key sectors like defence, space, and agriculture. And there are several more sectors like healthcare, energy, infrastructure, and civil aviation which offer huge investment capability. Smaller businesses too can think of diversifying in these sectors to tap their potential.