MSMEs stuck in a debt trap? How does that affect the nation?

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The Indian Micro, Small and Medium Enterprises are suffering from never-ending financial debts that have made them sick in this time of pandemic. The debts that MSME is being paid continuously is in fact affecting them in a negative way even in the wrong run. While doctors and healthcare staff continue to risk their lives to serve the patients in a dearth of infrastructure. Lending money to the MSMEs without assurance of getting them back is detrimental to the banks and NBFCs which are losing the capability of paying the MSMEs again in future.

Just like treating COVID patients who are extremely sick at the cost of the doctor’s health and without the assurance of the patient ever recovering, lending money to an already failing MSME is like paying for it at the cost of the banks without any assurance of it recovering from the debt load. The magnitude of sick MSMEs beyond recovery is increasing day by day and that can be worrying.

Indian MSMEs had a credit gap of 380 US dollars even before the pandemic started which means it needed the hefty amount to merely survive and that has been increasing to this day. So where can a status quo be reached? According to RBI, 65% of loans paid to the MSMEs are under moratorium until July 2020.

The need of the hour, therefore, should be focusing on demand related measures. The MSMEs  should consider  creating a growth of demands both within the country and outside of it. Formulating growth strategies and strongly implementing it should be what the policy-makers should be concerned with to save the remaining MSMEs.