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The platform saw a growth of over 200 per cent from March last year to May this year in trans­action volume done by MSMEs. Samreen Ahmad, Business Standard For a long time, small businesses have been an underserved market when it comes to digital technologies. After facing revenue losses in the first half of 2020, small businesses underwent a rapid adoption of digital payments. In the past 15 months since the pandemic hit, fintech unicorn Razorpay has boarded over 1.5 million SMEs. The platform saw a growth of over 200 per cent from March last year to May this year in trans­action volume done by MSMEs. Notably, 54 per cent of e-transac­tions happened via MSMEs from tier-2 and -3 towns. A look at the shifts in the digital behaviour of small busin­esses dur­ing pandemic that led to India’s MSME digital finance revolution. 1.5 million MSMEs adopted digital payment solutions for the first time during this period Small businesses saw their transaction volumes grow close to 200% MSMEs in tier-2 & -3 cities contributed to 51% of Razorpay’s digital transaction volume UPI transactions grew 346%, overtaking debit & credit cards, netbanking, and others

The shipping and logistics crisis plaguing the industry since the onset of Covid freight costs have skyrocketed 300% , worsening the situation for Indian SMEs who are navigating their business amidst the global pandemic, says a new report.  Drip Capital recently released a research paper around the 'Global Shipping Crisis' talking about the detrimental impact of the rising tide of freight costs on SMBs. Based on the shipping and logistics crisis plaguing the industry since the onset of Covid freight costs have skyrocketed 300% worsening the situation for Indian SMEs who are navigating their business amidst the global pandemic.  This competitive environment severely affected the SME exporters who were burdened by these high costs. In a statement, Pushkar Mukewar, co-founder, CEO, Drip Capital said, "The lack of containers doesn't just increase logistics costs, but also affects the SMEs' capabilities to fulfill orders and delays payment cycles while stressing their margins. If the issue continues, consumer-led economies are likely to scout for alternative markets with shorter trade routes to cut losses. This could severely harm SMEs who are already battling with the pandemic-led economic crisis."  The global shipping crisis, results from the uneven post-Covid economic recoveries of the world's largest importing and exporting countries. "The primary pillars of the crisis are significant fall in the availability of containers, reduced workforce, fewer shipping vessels operating, and erratic movements in demand for various commodities. Additionally, a lag in the supply of timber to manufacture containers, a rise in the number of containers being scrapped than produced further increased the cost of the containers which surged from $ 1600 last year to $ 2500 this year," he added in the statement.  In 2019, China contributed to 16.1% of overall international exports. But when Covid struck China's exports plummeted by 17% in the first two months of 2020. This was due to strict lockdowns leading to a manufacturing standstill, labor shortage to transport the incoming containers, and diversion of multiple reefer containers from major Chinese ports. Consequently, shipping liners predicted a further plunge in ocean freight and began skipping docks or even the entire route to shield themselves from significant losses.  "Delays in shipments mean the products would barely have a few months on the shelf of the buyers, who now run the risk of not selling the products. New orders will not be placed if the buyer suffers a loss. As a result, my strategy for the coming year until the container shortage issue persists is to only export on shorter and close-by trade routes. To avoid spoiling my trade relations, for the rest of 2021, I will not be servicing long-distance clients," said Jignesh Mehta, CEO, Rise, and Shine Overseas, in a statement.  The pandemic led to an economic contraction across the world. In March 2020, with social distancing protocols and coronavirus clusters amongst dockworkers, there emerged a shortage of containers in Asia as empty metal boxes were stranded at North American and European ports. As China started to recover from the virus and its economic impact, it was flushed with orders from North American and European markets, and it recorded a 3.5% y-o-y growth in April 2020.  Hence, China began ramping up its global empty container repositioning program. According to S&P data, in June, the total volume of empty twenty-foot equivalent unit (TEU) containers shipped from the US to China increased by 188% Y-o-Y and 245% Y-o-Y in June and July, respectively. On the other hand, more cargo came into consumer-led economies like the US, where the goods movement system had slowed down due to a lack of workforce and a series of lockdowns.  In a statement, Sachin Malani from Shree Metal Products said, "The buyers are understanding the gravity of the issue and are willing to share the ocean freight costs with us. They are also willing to renegotiate the product rates. There is cooperation by everyone in the shipping industry in these pressing times. But, if the transport cost keeps increasing, there might come a time when our local distributors in the US start doing a cost-benefit analysis. They might evaluate whether they should keep importing from us or source locally from the US. Competing with US manufacturers could be a problem for Indian SMEs."  Between August and October, when the lockdown was gradually relaxed, and demand started picking up in the west, the requirements for shipping containers returned. This surge in demand, coupled with the fact that empty containers were at the wrong place at the wrong time, saw Drewry's composite WCI jump by almost 27%, from $ 2059 at the start of August to $ 2615 at the end of October. The index continued to rally, and in June 2021, it touched almost $ 6430.

With the growth of Indian economy and employment generation capabilities, the Micro, Small and Medium Enterprises (MSMEs) are considered to be the backbone of the national economic structure. As on date, the MSME sector accounts for nearly half of India’s total exports. This sector is rightfully being seen as a growth booster, providing resilience to ward off global economic adversities on account of pandemic. The MSME Sector is an important pillar to carry forward the vision of ‘Atmanirbhar Bharat’ and face the economically challenging situation posed by COVID-19 pandemic. Various schemes have been launched by the Central and State Governments to provide a much-needed impetus for the revival of the MSMEs. However, to reach the end users, there is a requirement of an enabled, simple and effective ecosystem which can help the MSMEs to get benefitted in a most optimized manner. ICAI, believes that Chartered Accountants with close proximity to the business, industry and entrepreneurs can work with the focus areas of MSMEs especially after being hit by COVID tsunami. CA. Nihar N. Jambusaria, President, ICAI said “ICAI is responsive to the emerging challenges faced by the MSMEs & Startups. To address the issues faced by MSMEs & Startups, the ICAI will be taking a number of initiatives to strengthen and develop their capacity in order to enhance their competence and improve their visibility amongst the business community. The Institute will develop and provide Capacity Building Measures for the enhancement of the portfolio of MSMEs & Start-ups.” To mark the importance of the International MSME Day, a series of programmes are being organised to address the various needs of the MSMEs at local level. These programmes will focus on creating awareness about the various schemes introduced by the Government at Central and State level. The programme series will be canvassed around a cen On the occasion, the three very important initiatives for the MSMEs namely ICAI MSME EXCHANGE, ICAI MSME Portal and Certificate course on MSME will be launched. Over 3.20 lakh Chartered Accountants community has deep reach and connect to the MSMEs sector as the trusted advisors providing a variety of services including project financing, working capital management, asset management, export promotions advice, budgetary forecasts, financial modelling, preparing standard operating procedures, assessing the design and operative effectiveness of internal controls besides regular accounting, auditing and taxation services.

As large corporates are deleveraging and growth in the segment expected to be measured, the country’s largest private sector lender, HDFC Bank, is looking to leverage its distribution in non-urban markets and digital strengths in expanding its SME banking platform. Sashidhar Jagdishan, MD&CEO, HDFC Bank, in an analyst call organised by Jeffries, said SME will be the fastest-growing segment over the next 3-5 years. “We have had about 20 years of good track record in the SME space. We are probably the second largest MSME banker in the country, after SBI. But, even though we may pride ourselves in having had a fantastic book, we believe that with the kind of distribution we have, the digital offerings we have for the MSMEs, there is a great opportunity for us to expand further”, he said. Jagdishan also said that as far as big corporates are concerned, the debt-to-EBIDTA ratios have been coming down, which is extremely important from a confidence perspective both, at the rating agency level and from a credit perspective. "With economic activity going up, we will see the good corporates in the right sector growing, but the pace of growth will be measured," he said. Commenting on the impact of the second wave, Jagdishan said, "Going by what we are seeing at the ground level, I think it’s slowly starting to pick up from the complete paralysis that we saw over the last 30 days." “From a near-term perspective, I don’t see any great shakes in terms of performance in the quarter. We are not too worried even if it’s a very tepid quarter. What I can see is the resilience, the buoyancy when things normalise,” he added. On the client side, the bank is largely comfortable as 85 per cent of retail customers work with companies rated and above , where job losses have been low. SMEs were better prepared than in past, and larger corporations have better liquidity in their balance sheet. “In terms of consumption, which will be a key indicator of economic activity, I see the upper-middle-class segment bouncing back and creating a surge in spending and driving consumption. But the middle and the lower-middle-class segment will be reasonably stable. They would want to recoup their savings. So, consumption on a mass basis will take some time,” Jagdishan said. On the technology issues the bank has faced for which it was pulled up by the regulator, the management highlighted that it continues to work with the Reserve Bank of India (RBI) to resolve the issue and at the same time build more robust platforms. “While tech-outages are a normal business risk for any bank/ financial company, bank could have built a system to ensure faster recovery here”, Jagdishan said.

An umbrella body for micro, small and medium enterprises AICA on Wednesday sought immediate intervention of Prime Minister Narendra Modi on rising prices of raw materials such as steel, iron ore, aluminum, copper, plastics and paper. As many as 170 industry associations have joined hands to form the All India Council of Association of MSMEs (AICA) in order to deal with issues of the sector hit hard by the pandemic. In a representation to the prime minister, AICA said that the sector is facing huge challenges due to erosion of working capital on account of huge rise in prices of raw materials like steel, iron ore, aluminum, copper, plastics, PVC, paper, and chemicals. "We understand this volatile situation is temporary in nature. However, it can cause permanent damage to the MSME sector. In spite of a drop in demand due to lockdown, prices are on the upswing, particularly steel, pig iron and other raw materials, too," it said. It claimed that steel and other base material manufacturers are declaring 10-20 times higher profit whereas all the MSMEs are on the verge of extinction. The association has suggested eight points to overcome the crisis and it includes protection against escalation in prices for some period; public sector enterprises must be instructed to accept cancellation of orders from MSMEs with no penalty/ black listing; a formula should be derived for price escalation; and quota for MSMEs at concessional price. It said that the government should allow import of all steel materials based on cost and quality requirements at zero import duty and no anti-dumping; and banning the export of iron ore and steel products. It also recommended that MSMEs, under government contract and suppliers to PSU, should be allowed to revise their price with fresh quote and for all finalised government and PSU supplies, they should be permitted to invoke escalation clause and requote. "If the MSMEs get crippled and choked this way, due to spiraling price rise of raw materials, it will only discourage entrepreneurship, ultimately leading to failure of the government's objective of Atma Nirbhar Bharath. "We, therefore, urge the government to take concrete steps to reign in raw material prices," it said. The core team members include Coimbatore District Small Industries Association President M V Ramesh Babu, Arise Chairman Yogesh Pawar, Southern India Engineering Manufacturers' Association President K V Karthik, and Ludhiana Hand Tools Association President S C Ralhan. MSMEs account for 30 per cent of India's GDP, 45 per cent of manufacturing output, 48 per cent of total exports, and employ over 11 crore people. There are about 63.5 million MSMEs in the country.

Covid-19 crisis: Relief for MSME promoters under debt scheme likely Shreya Nandi, Busienss Standard The Centre is planning to make procedural changes in the stressed asset guarantee plan for small businesses to make it more popular. With this, promoters may not need to take risk in their personal capacity to avail the benefits of the scheme. “The industry has been calling for tweaking some provisions of the scheme so that more businesses are able to avail benefits. There could be around four-five procedural changes in the scheme,” a senior government official told Business Standard. The micro, small and medium enterprises (MSME) ministry will soon take it up with the finance ministry's department of financial services before implementing any changes, the official cited above said. The government had, in May last year, announced a slew of measures to help MSMEs tide through the Covid-19 crisis. Credit Guarantee Scheme for Subordinate Debt was announced to revive small business units that had become stressed. The idea was to support distressed MSMEs by infusing capital in the form of equity. In the scheme, the government is facilitating a provision of Rs 20,000 crore as subordinate debt. According to the guidelines, personal loans are given to promoters of stressed MSMEs, which are infused by the promoter as equity into the business unit, thereby enhancing the liquidity and the debt-equity ratio. Promoters of distressed units are given a debt facility of up to 15 per cent of the promoter’s stake or Rs 75 lakh, whichever is lower. Besides, the promoters are required to bring in 10 per cent of the sub-debt amount as collateral, while 90 per cent guarantee coverage is given under the scheme. Such guidelines have been the main reasons for the scheme not gaining popularity among businesses, the official said. The response to the scheme has been lukewarm, government and industry officials said. As of May 14, guarantees to the tune of only Rs 68.39 crore were issued, benefitting 632 businesses, Business Standard had reported earlier. The subordinate debt is provided by banks and guaranteed through Credit Guarantee Trust for Medium and Small Enterprises (CGTMSEs). The Centre has offered Rs 4,000 crore support to CGTMSEs. The scheme was operationalised in August last year and aims to benefit 200,000 small and medium businesses. It is valid till September 30. “The objective of the scheme is to provide personal loans through banks to promoters of stressed MSMEs for infusion as equity/quasi-equity in the business eligible for restructuring, according to the RBI norms for stressed MSME advances,” the guidelines said. The scheme was announced as part of the government's Aatmanirbhar Bharat package amid a nationwide stringent lockdown, along with the popular emergency credit-linked guarantee scheme that has now been extended to a bunch of sectors. Support for small businesses is crucial as they are considered the backbone of the Indian economy and are major job creators as well.

MSMEs and micro enterprises have been the most impacted with nearly 60 per cent of addition to Non Performing Assets (NPAs) in April and May coming from MSMEs, nearly twice what it was earlier. By Sunny Verma, Indian Express THE SECOND wave of Covid has thwarted the recovery process underway across sectors, with the lockdowns in states and the spread of disease overwhelmingly impacting the MSME and service sectors, according to fresh data coming in on loan slippages with banks and micro-lenders. From hotels, tourism, transport and aviation to trade and small manufacturing units, specific pockets of the economy are beginning to report a disproportionate impact of the distress, both in the form of decline in incomes and rise in loan repayment defaults. The impact of this going forward could be two-fold: any improvement in the overall consumption trajectory is heavily contingent on a recovery in services sectors such as trade, hotels, transport, communication & services related to broadcasting, which supports over 20 crore households; and corporates in the listed space, which have reported better growth numbers, could end up feeling the distress in the unorganised segment. MSMEs and micro enterprises have been the most impacted with nearly 60 per cent of addition to Non Performing Assets (NPAs) in April and May coming from MSMEs, nearly twice what it was earlier. The pandemic impacted businesses by the second week of April itself, said a senior Indian Bank official. “Slippages are mainly coming from MSME. About 60 per cent of the NPA (of April and May) is from the MSME sector. This used to be between 30-40 per cent earlier. The elements of the defaults are labour constraints, transportation issues due to lockdown, non-availability of raw material and uncertain cash flows,” the banker said. Micro finance companies, lending unsecured funds to micro entrepreneurs, have witnessed a decline in collection efficiency owing to protracted Covid curbs. “Loans in arrears for over 30 days or the portfolio at risk (PAR) could rise to 14-16 per cent of portfolio this month from a recent low of 6-7 per cent in March,” rating firm Crisil said. “Our customers who are majorly small traders and business people engaged in daily use products, were unable to open their shop and their livelihood has been accordingly impacted,” said P N Vasudevan, managing director and CEO of Equitas Small Finance Bank. The Retailers Association of India said retail sales in the month of May 2021 stood at -79 per cent of the pre-Covid level of sales on a year-on-year comparison with May 2019. “Retailers are looking forward to some improvement in the month of June with gradual unlocking. However, the retail industry needs collective support from various government bodies,” said Kumar Rajagopalan, CEO, Retailers Association of India. Indian Hotels, which reported a loss of Rs 524 crore in FY2021, said its business was severely impacted during FY21 on account of Covid. “During the second half of the year, the company witnessed some signs of recovery of demand, especially in leisure destinations. Whilst there has been a second wave of the pandemic in the last few months in some states, there has also been increased vaccination drive by the Government and the company continues to closely monitor the situation,” it said. Consumer confidence in the current period, which has been in the negative territory since July 2019, fell to a record low in May 2021. The current situation index dropped to 48.5 in May 2021 from 53.1 in March, according to the Reserve Bank of India consumer confidence survey. Air traffic is expected to slump in fiscal 2022 and fully recover only by the fourth quarter of next fiscal because of the debilitating consequences of the second Covid wave in India, Crisil said. Passenger traffic at airports has nosedived, with average daily domestic passenger traffic halving in May 2021 from February 2021, or to a mere 10 per cent of pre-pandemic levels seen in May 2019. In the automobile sector during the month of May, factory dispatches of passenger vehicles and two-wheelers contracted to one-third of the previous month, while three-wheelers made negligible sales of just about 1,200 units. Cumulative sales of five players in the commercial vehicles industry was nearly half the levels of the previous month. According to Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, the overall consumption trajectory will depend on the recovery in services like “trade, hotels, transport, communication & services related to broadcasting”, which support roughly 25 crore households. Corporates, in the listed space, reported better growth numbers across parameters in the fourth quarter of FY21, but this trend may soon reverse, he said.