By Dr. Pratapaditya Mishra* in Bhubaneswar, April 7, 2020: We get up in the morning and until we go to bed in the night, we receive repeated “Stay Safe” message reverberating in our ears and getting embedded in our subconscious minds. Medical researchers have been working day in and day out to find vaccine to stop the spread of Covid-19 virus. They say they are too close to getting the result and their words impress us like soothsayers predicting a better and brighter tomorrow.

Although no definitive outcome has come so far, but the government, its different administrative units, medical practitioners, healthcare staff, other support staff, NGOs and media organizations have not only been working hard to both prevent the spread and cure the affected ones, but also instilling confidence in every citizen that we will defeat Corona for sure.

“I do not know what to do now” will be the question hovering on the mind of all the business persons, more particularly amongst the startup entrepreneurs. In most of the cases they have not factored the kind of uncertainty created by Corona pandemic, affecting the global economy seriously. Various renowned business research organizations are coming up with different projections; in coming years how world economy will be pushed back and the global losses are predicted to be between 1 and 2 US $ trillion. All these calculations have been made keeping in mind the present and immediate past four months development.

But until now the algorithm of the growth of this disease is yet to be deciphered. It means anything can happen to any country or to any economy in coming few months. The trend analysts and business researchers in India are doing data modelling exercises and have been predicting the numbers to be affected by Covid-19 virus to be much more in India in the ensuing month and in next month or so and lockdown period (total or partial or area specific) may continue further to control the spread. Once more and more people are tested the situation will be clearer. Startups being one of my favourite areas of study and when their existence and continuity may be in a state of uncertainty, I have decided to do some quick survey and share my thought on this.

Under such uncertain and turbulent time, it is natural that the business organizations are bound to feel shaky and anxious. The MSME sector, more particularly the startups, are raising existential questions. They suddenly find themselves in a unchartered water. Are they going to survive? Can the Government take measures to absorb the shock and lend stimulus package during this hour of crisis? Or, it is the doom time for them. Some of the recent industry surveys have already shown that the food service, events and hospitality industries going to be hardest hit and the technical workers have started showing about the future of their jobs. As such many of them are reeling under the pressure of liquidity crunch, demand curtailment, NBFC issues and fear of punishment due to GST non-compliances.

Let’s pan towards a rundown of some of the most noteworthy initiatives taken by some of the developed nations as a quick response to this situation. Countries like the US, the UK, China, Australia, France and Saudi Arabia have rolled out billions of dollars to support businesses. It includes giving stimulus plan to Small and Medium Businesses. They are also creating economic support packages to assist the retail banking clients.

China has ordered to lower barriers to startup loans. In Australia the entrepreneurs can have access to cash grants up to $25,000 as an additional tax break. France has already begun taking 2-3 quick steps, i.e. a) funding for payroll supplementation for employers those who are forced to cut employees’ hours, b) granting special loans for businesses affected by the outbreak and c) working out solution through business mediation support for the companies owed payment from customers, or the companies who owe payments to banks and other financial institutions.

Italy, although hit by Corona very hard, already announced a €25 billion relief package which would include some selective resources for small businesses, including tax credits up to €20,000 annually. Netherlands is working on scheme to increase availability of bank loans and guarantees for entrepreneurs as well as relax requirements for tax payment deferrals for affected companies. Germany has focused approach towards startups that encourage social distancing and offering substantial amount of loans from its state development bank. The United Kingdom has started to offer to underwrite loans for affected businesses, among other relief measures.

The US Government has come up with $2 trillion Corona rescue package aimed at fundamentally taking care of healthcare, job security, food relief and millions of workers on federally funded life support. Hopefully, the demands of Small Business Association to lift regulations and to make access to capital easier for the startups and small businesses can be taken care of by this.

How is our Government responding? It took sometime to prioritize between making roadmap for higher revenue collections to bolster the economy and taking care of the business sentiment by relaxing and waiving on taxes and making benevolent dispensation as against penalty for non-compliance on the other side. It prudently chose latter.

Looking at all the situations the Finance Ministry deferred the statutory payments until 30th June 2020. Then the Reserve Bank of India has done the rate cut, which will lead to reduction in Banks’ MCLR (Marginal Cost of fund-based Lending Rate). It means the borrowing costs would be reduced and there would be deferred payment, which will not be counted as defaults. Such a monumental step has never been taken in India before. There is big sigh of relief in the MSME sector, to which the startup organizations belong to. Also, the rating agencies have started downgrading their ratings would give a boost to the new generation startups and middle class borrowers. Most importantly, the banks will not have a rise in the NPA levels.

But is it enough to save the derailed economy of MSME sector or the Government has been making calibrated approach going block by block is the pertinent question? One section of industry urges the Government to immediately waive interest on the Working Capital loans. Confederation of Indian Industries (CII) has suggested to give a stronger fiscal stimulus, which will help the people financially and bolster consumer demand. It has also suggested removing a long-term capital gains tax of 10% and fixing the total dividend distribution tax at 25%. Another section from the industry is suggesting that Government of India can support EPF contribution for two quarters and in order to give further relief, there should be a 50% reduction in tariffs of facilities such as water, electricity etc.

The Ministry of MSME has put forward a proposal to the Ministry of Finance to protect the sector from this calamity. Let’s see what is there for the startups.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has done some surveys and it says that about 53 percent of the industry have been directly affected by Covid-19 virus. But 42% of the industry has also asserted that they would take upto 3 months to get back to normalcy. It augurs well for the Indian Economy for sure.

Although there is already warning about a big recession looming ahead and all of us know India may not be in position to create immunity from all that are/ will be happening around the world or, but it all depends on how our Government responds to the volatile situations. This pandemic not only exposes the weaknesses of many nations but also creates many opportunities. Let’s see how the government strategizes its action plan taking into account the Strengths, Weakness, Opportunities and Threats.

One learns from the old adage; “We cannot direct the wind, but we can adjust the sails”. Our government has been buffeted by number of problems and issues and some of them are beyond its control but we trust it can respond constructively with a calibrated approach not only to battle Covid-19 to save lives but also rebuild the economy to make it healthy.

(Dr Mishra is a Visiting Professor in Utkal University)

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