Covid-19 impact on small businesses: Positive or Negative?
Needless to state, Covid-19 has created a great impact for small businesses across India
Needless to state, Covid-19 has created a great impact for small businesses across India. Nevertheless, it has not only restricted its impact to small businesses, but also extended to India's labour market; nationally & internationally.
Large businesses, corporates, institutions, conglomerates, on the other hand, stay mildly affected as compared to their "industry colleagues" - the micro and small businesses. Indian inc. launched the "Atmanirbhar Bharat" along with banning various Chinese products. According to research conducted by Institute for Competitiveness along with Times Network, 90 per cent of respondents believe in shifting government focus on substituting imports of essential commodities.
For instance, domestic and home-grown businesses have requested an increase of import duties, such as the sodium sulphide, and basic chrome sulphate, which is used for treating leather, hence making it difficult and expensive for Indian distributors, wholesalers, importers who were previously importing such foreign products. Here, multiple businesses are gaining and losing simultaneously. For example, the distributors, importers of these chemicals would be at a loss, & would now need to shift to Indian manufacturers of the same chemicals. Here, Indian chemical manufacturing industry is booming.
The distributors, retailers, wholesalers, resellers across various industries would be gaining and losing at the same time and would be on a "new manufacturer hunt". This creates opportunities for Indian manufacturing companies. To solve this problem of choice for middlemen, "Which manufacturer to choose?" the Distributor's Discretion on Manufacturer Matrix can be adopted. The matrix allows the distributors, middlemen, agents, retailers, wholesalers, and more to choose the right manufacturer on the basis of marketability and cost. Thus, making shift from foreign brands to Indian brands more feasible, clear, & effective.
We begin with positivity. Covid-19 has initiated, "Atmanirbhar Bharat", "New Educational Policy 2020", "Labour Codes", "One Nation One Ration Card", new MSME policies, and so much more. All of the above have considerably re-built the trust of Indian businesses, labourers, and society at large. Undoubtedly, with Atmanirbhar Bharat, and new MSME policies, the Indian manufacturing sector has been given a push.
India has the second largest labour force globally according to the International Labour Organization 2018. Post-Covid, in 2019, India had ranked 63rd in Ease of Doing Business category of the World Bank, which was a visible leap from 142nd position 5 years ago.
Although, we can predict that the health & care industry, pharmaceutical industry, essential commodities industry, education industry, are now on major focus due to multiple factors such as ban of Chinese products, Japan investing 2.2 billion to move Japanese companies out of China, increase in import duties, tariffs, and taxes, and most importantly, India ranks 'third' in Manufacturing Risk Index 2020 of Cushman and Wakefield, where it implies that, India is the THIRD most suitable place for global manufacturing firms on basis of conditions of operations and competitiveness.
For example, India also has initiated "Vocal for Local" and "Production Linked incentives" which empowers the food industry, textile industry, automotive industry, electronic manufacturing in India.
What can India improve on?
Goods and Service Tax can be more clearly explained and executed, as more and more small businesses are wary. Creation of employment opportunities for numerous students who have been on the edge during the pandemic, a policy which protects both recruiters and employees. Properly marketed "entrepreneurship education cells" in partnership with management consultancies, startup consultancies, business coaches & more for building India's innovation and entrepreneurship capabilities. Though similar, "Entrepreneurship Education Cells" still exist in schools and colleges, but are these cells given importance equal to term examinations? No.
Covid-19 had an immense negative impact on Indian economy, so much so that it cannot be concisely written in this article. Although, the very evident macroeconomic and microeconomic factors affected are GDP which reduced by 23.9 per cent in the second quarter of 2020. India, though progressing yet suffering. Hence the question persists, Positive or Negative impact of Covid-19? India is the 3rd most affected country due to Covid-19. The industries which have been evidently affected are finance, construction, real estate, utilities, mining and quarrying, hotel and transportation, and others. Both exports and imports fell.
Unfortunately, the micro and small businesses, daily wagers, and more have all placed placards with either "temporarily closed" or "to-let" boards written on them. The sad and temporary demise of small retailers, wholesalers, distributors, manufacturers, and the society at large.
In conclusion, the scenario for Indian small businesses seem to be promising provided that the Atmanirbhar Bharat is well executed. Plans and policies have been formulated, but the implementation still needs work. One Nation One Ration Card would come to force only in 2021, and due to this several migrant labourers have faced the wrath of hunger during the pandemic, where for the time-being Government could have promoted e-PDS systems, and educated the people about the same. "Vocal for Local" would go a long way, provided that we are firstly vocal about the benefits of all these policies, procedures, and how to avail these benefits.
Many government organisations are yet to 'acknowledge the knowledge' of these new policies. This delay is the loophole. India should add additional efforts and make complete utilization of its 'cheap labour force' as an asset for foreign companies to establish themselves here. How many Japanese firms that shifted away from China are set to establish themselves in India? Known to us are only two, i.e; Toyota-Tsusho and Sumida. News reports do state that many Japanese companies are aiming to invest in Uttar Pradesh, and Indian is expecting strategic investment from Japan, but how are we unfolding it, how are India's business sector and top-level managers working towards it?
100 per cent FDI in contract manufacturing which came in 2019, again was promising, but the Covid-19 blew the plans. What can be done to revive it again along with tapping the benefits of the long forgotten Special Economic Zones. The SEZs are duty-free zones, and India recognizes eight of them, Cochin (Kerala), Chennai (Tamil Nadu), Falta (West Bengal), Kandla and Surat (Gujarat), Noida (Uttar Pradesh), Visakhapatnam (Andhra Pradesh), Indore (Maharashtra). The SEZs help in economic development. What if we may direct Japanese companies to the SEZs? All of the multiple possibilities or impossibilities can empower India's small businesses.
(The author is founder & CEO of Byrut Business Solutions, PhD scholar and Business editorialist)