Naveen Choksey runs his own small car washing unit. He has some 10 shops all over Mumbai and he employs 50 people. His monthly outgo is around Rs.15 lakh, including insurance for the employees. But given the way things are, his business is now shut down and all 50 employees are sitting at home, twiddling their thumbs – this work cannot be done online! He has EMIs to pay and other fixed costs to address. He might be able to pay this month’s salaries but with this lockdown extending into mid-April, he is not sure he will be able to pay and sustain into the next month.
Hundreds and thousands of people like Naveen are today staring at a blank wall with despondency written large over their faces. They all say, “if the corona does not kill us, this closedown will most certainly kill us.”
And this is no exaggeration. There are enough research papers to show that there was a dramatic spike in suicides between 2008 and 2010, which can be linked with the economic crisis. Researchers from the University of Oxford compared suicide data from before 2007 with 2008 till 2010 and found more than 10,000 "economic suicides" associated with the recession across the U.S., Canada and Europe. The majority reasons were job loss, debt and home foreclosures.
That’s where we are heading into if this situation is not controlled. The PM did the most fantastic thing by closing down the country; it is a bold move and all of us are proud that the leadership could be so decisive, putting health and lives ahead of economic consequences. But along with the closedown, the PM and FM have to come out with measures ASAP to avert a human crisis after the virus is gone.
Today we all read the news of how Wuhan is back to business and production lines have started rolling, ready for the world. In one corner of the mind, this infuriates as you feel the whole world shut down and now they are open! But on the other, maybe we all need to learn what the Chinese Govt did to limit the humanitarian crisis.
So here is a quick list of what China did to help the small and medium enterprises get back on their feet:
- People’s Bank of China provided a major monetary stimulus worth $245 billion in February 2020
- $15.9 billion to fight Covid-19 in the form of support and guarantees to the local governments
- Interest rates were slashed and CRR were brought down
- For better transmission of rate cut and liquidity – regional banks incentivized to pass on the lower rates, mainly to SMEs.
- Private banks nudged to provide relief to SMEs by postponing EMIs and also deferring repayments of principal
- Ordered its PSU banks to increase lending to SMEs by at least 30% in first half of 2020.
- Around $50 billion allotted to lend to SMEs at preferential rates
- Industries impacted directly by Covid given tax breaks and other Govt payables lowered
And this is probably the kind of ‘economic package’ which our FM should look at. The large enterprises might post losses or reduced profits but they will not fade into extinction. But if a package directed specifically at SMEs and MSMEs is not announced soon, we will have a catastrophe on our hands.
One SME supports so many families, so many children and their futures. If the Govt does not hold their hand today, so many families will be pushed into a crisis, impact of which will resonate for years to come.