Supporting MSME sector essential for economic recovery

The recent decision by about 400 small and tiny foundries in Tamil Nadu to stop operations in protest against the steep rise in raw materials is a reflection of what is going on in the country's micro, small and medium enterprises (MSMEs). These foundries, located in the widely-industrialised Coimbatore district of the State, took the extreme step of closing down operations as a part of their agitation to highlight skyrocketing prices of raw materials used in foundries. The units are said to be losing close to Rs 30 crore a day due to the shutdown.

According to reports, prices of raw materials used by these foundries went up by a whopping 30 per cent to 50 per cent in the last two months when compared with the prices that prevailed in pre-Covid days. Hoarding by traders to create artificial scarcity and other factors are said to have pushed up the prices. Foundries use steel, bronze, brass, and other metals for making casting products which are in turn used in automobile, textile, and other manufacturing processes. About two to three lakh people work in these foundries and most of them are contract workers. With the operations on hold, most of the contract workers will lose wages.

Like most of the MSME units across India, foundries also suffered a huge blow due to the Covid-19 pandemic. Lockdown has taken a huge toll on them. Further, the economic slowdown triggered by Covid-induced curbs also left a cascading impact. In this backdrop,the steep rise in raw material prices must be a double whammy for the foundry units which are seeking the central government's intervention to bring down the prices.

Frankly speaking, the MSME sector, which employs close to 11 crore people across the country, is the backbone of India's economy, accounting for nearly 30 per cent of GDP. It contributes about 40 per cent to the country's exports. But most MSMEs in India operate on wafer-thin margins. As consequence, any disruption in their operations will leave a debilitating impact on them. In this context, one can understand the adverse impact of the Covid-related economic crisis. It's true that under its Atmanirbhar Bharat Abhiyan, the central government announced several measures to help the MSME sector survive the Covid crisis. The Reserve Bank of India also came out with some steps. But more proactive measures are needed to bring the MSME sector back on growth. Moreover, supporting the MSME sector is essential for speedier economic recovery. Otherwise, the country maysee more protests and shutdowns on the lines of the one that is currently underway in Tamil Nadu.