The pandemic has taught us how difficult it is to depend on other countries to meet our basic needs. Now is a good time to focus on advancing the Make in India program
COVID-19 has affected the whole world. The deadly virus has not only cost lives, but it has also destroyed and crippled the economy.
In the midst of the epidemic, the 21-day blockade is a reasonable step, but you are wondering what it will look like for the industry, especially MSMEs. It becomes a problem for the whole industry, and those who were prepared were able to navigate while others had to find a way out.
According to the latest annual report from the Ministry of Micro, Small and Medium Enterprises, MSMEs, considered to be the backbone of the economy, represent 29.8% of GDP and create millions of jobs each year. You are in a great crisis. Although the government has taken proactive steps to ensure a minimal real-time effect, long-term negative effects on the economy are inevitable. The question is how to minimize the effect.
The most affected MSME manufacturing segment needs protection and assistance to minimize and even rekindle the damage caused by the pandemic. It is a monumental challenge that the combined efforts of industry and government would require.
The blockade stopped the supply chain in the manufacturing sector. Demand is currently expected to soar, while supply will be extremely weak. As free trade declines, commodities may become scarce. It will take time for the industry to be ready in time to meet the global demand for the pandemic. According to Barclays, India’s 21-day blockade could drop its GDP from 4.5% (previously estimated) to 2.5%.
Social distancing means that delivery delays can disrupt companies that work just in time (JIT) or with limited inventory. Across the country, the closure has resulted in labor shortages, which in turn have contributed to the limited availability of transportation.
The main sectors that suffer are chemicals, cars, textiles, steel, etc. This brings us to the glaring reality that many jobs will be lost and many businesses closed. The International Labour Organization (ILO) estimates that COVID-19 will destroy up to 25 million jobs. According to the United Nations Conference on Trade and Development (UNCTAD), this will likely cost the global economy between $ 1 and $ 2 trillion this year.
The government, which is monitoring the situation and meeting with stakeholders, has announced numerous aid measures to save the economy. The government has exempted companies from all trade agreements with a COO (certificate of origin) for exercising preferential rights. It will be loaded retrospectively later. Exceptions have been made for certain documents such as the RCMC (Cum Certified Membership Record) if they expired before March 31 until September 30. The 2015-2020 foreign trade policy has been extended until March 31, 2021. Under the pre-license and EPCG regulations, the export obligation period which expired between February 1 and 31 July was extended by six months. The government also decided not to increase the costs of holding the containers until April 14.
The government can take other measures to relieve pressure from the industry. You must provide sops for locally produced MSMEs. It should invest more in online infrastructure and encourage small businesses to meet this demand. Such a measure would reduce import costs. To boost exports, the government can allocate subsidized warehouses and place barriers in the supply chain.
On the logistics side, vehicles carrying important supplies can have a free pass at checkpoints and toll stations. The government may also consider sharing the benefits of lower crude oil prices with consumers. Subsidies or tax deductions can also be granted for driver salaries and a higher deduction for capital costs of commercial vehicles, etc.
At the international level, there is a need to enter into trade balance talks with important trading partners and, possibly, to reduce trade barriers.
Overall, this is a good time to focus on and pilot the Make in India program. The pandemic has shown us how difficult it is to depend on other countries to meet our basic needs. Now is a good time to be self-sufficient in vital areas.