Much has been stated about the role of MSME's in the economy and it's impact on employment. The matter got into high focus especially in the light of reverse migrants of laborers to their respective home states due to COVID. The heart-wrenching tales of desperation made a lot of media headlines. However, no one seems to have got down to get to the bottom of this issue and explore the role of MSME in this exodus. This blog is my personal opinion about the obnoxious role it has played and continues to play and the rest of the society seems to be concerned about how critical a role this segment plays. I am definitely not convinced that in the need of the hour this community has acted in detriment to the society in large.
You will notice that India is all about employment in Informal Sector. Just 50 million are employed in the formal sector. A significant number of these 50 million are engaged in Government and or large Private Sector firms.
Overview of MSME
The distribution is even between urban and rural India both
in manufacturing and services. Urban manufacturing is lower than rural in the
MSME segment whereas trade is lower in the rural sector.
It is shocking to note that 99.5% of the MSME’s are Micro – less than Rs 25 lac turnover. The small and medium are just a fraction of the total. 3.35 lacs out of 633.88 lacs.
The average employee per MSME is less than 2 per unit – 6.33
crore units employ 11 crore workers
The small and Medium segment adds up to 0.5% of the total number
of units but employ about 5 crores. The balance of 6 crore units are more like
individual operators.
It is ironic that MSME's progress is being considered as a key
driver of the economy. Much of this discussion does not reflect the true nature.
Consider the following:-
- 63.3 million MSMEs are reported to exist.
- Less than just 1.13 million are registered
- It is reported that MSMEs employ more than 110 million people
- 43 million MSME’s in the services sector
- 19 million in the manufacturing sector
- The divide between urban and rural is nearly same for the MSME.
- As per the registration data States like UP, Bihar, Bengal, and TN have the maximum number of MSME’s So this raises the question, why the laborers from these states had to migrate
Given the above situation, a significant majority of the
migrant laborers are either doing self-employed work or are engaged by MSMEs in
the services sector – such as restaurants, hotels, media, and entertainment
etc..
You may be surprised to note that 6.3 crore MSMEs have a
debt exposure of over 17.4 lac crore. So, with such low economic activity and
high debt exposure does it ring a bell. How much of loans are required by these
Micro and Small enterprises to sustain and grow. Look at the lending as per
CIBIL
Note the amount of lending to Individuals – Rs 52.6 lakh
crore. At an estimation of 6 crores of Individual-based MSME’s with a loan of
Rs 12 lac crore for Individuals with
Business lending, add to this low revenue as per GST only 1 crore have GST
registration ( meaning revenues is above Rs 25 lacs per anum), it seems strange
where has this money been spent by these units. Please note that over and above
the business lending 40 lac crores have been disbursed to this segment.
So where has this funding evaporated? NPA’s of all segments.
Note the Medium sector, Large Sector, and all the Individuals – all above 12%.
It’s a fallacy to believe that the MSME’s are really
contributing other than showing up as a business unit for statistics.
As per some estimates, the belt covering Eastern UP, Bihar
and. Jharkhand accounts for over 25% of all migrant laborers. Of the estimated
140 million migrants, this belt contributes to about 35 million. The population estimates of the top 51 cities
account for 42% of the total population. The top 10, Metros and Tier 1 cities have
a combined population of 110 million (11 crores). At 35% migrant labor population, the total
number of migrants in these cities would be around 35 million or 3.5 crore. The
migrants who helped build towers of progress for builders who thrive on the cash
economy were denied paltry wages by this community. We know that a large chunk
of migrants is employed in the Construction segment. Labour exploitation is
highest in this segment. Be it living conditions, mafia controlled labor
supply, and payments. Time and again they these laborers get the boot. Life in
services is not very different.
The story is the same for every sector employing migrant labor.
Most of these employers are private individuals and may be operating their
business on credit. The entire cash is directed towards personal wealth.
Impossible to believe that they did not have a cash reserve to pay wages to
people who built their dreams.
Humanity, rather lack of it, is fully visible from State
Administrations ruled by highly insensitive and incompetent and unresponsive
people. Much of this crisis is also due to apathy of the employers whose
priority – dump labor over the erosion of personal wealth.
Why did the business owners force the Govt to amend compulsory
payment of wages? Most of the migrants had tales of woes of being forced to
leave due to unpaid wages, hostile landlords. The root of reverse migration is
less COVID and more about a systemic lapse
- High funding and Poor monitoring of MSME’s in the states leading to the creation of a false sense of employment and drainage of resources from banks to personal pockets.
- Lack of morals and humanity demonstrated by this community
Time has come to pay attention and make socio-economic
course correction. Put every MSME and businesses that thrive on labor
exploitation under the scanner. The world must know the names of these owners so
that we can ensure that they do not get any oxygen for revival.
