Demonetisation, GST, unplanned COVID lockdowns decimated TN MSMEs: Congress

This “man-made disaster” brought nearly all economic activity to a standstill and businesses were unable to pay workers and consumption ground to a halt, the Congress leader claimed.

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GST— second blow

“Kongu Nadu’s MSMEs, highly dependent on cash flow, were hit hard. In Tiruppur, as many as 1,000 small factories closed unable to withstand the sudden economic upheaval. Textile exports fell from the expected ₹30,000 crore to ₹26,000 crore,” he said.

Ramesh said the second blow delivered by the NDA government to the MSMEs in Tamil Nadu was the GST.

“The overly complex tax regime was brought in hastily, with no concern for the heavy expense that onerous filing requirements place on the MSMEs,” Ramesh said.

The impact was that while large enterprises saw their effective tax rate rise from 27 per cent to 28 percent, the MSMEs saw their effective tax rate nearly double from the previous regime, he added.

“By 2019, almost 50,000 MSMEs in Tamil Nadu were forced to shut shop. More than 5.19 lakh people lost their jobs in 2017-18 alone. In Coimbatore, MSMEs were manufacturing pumps worth ₹50 crore daily. Post GST, the trade volume nosedived to barely ₹5 crore. Textile exports from Tiruppur fell by ₹16,000 crore in 2017-18,” he said.

Ramesh further pointed out that production fell by 20-25 percent in Sivakasi’s firecracker industry, which supports three lakh workers.

Before the BJP came to power, Tamil Nadu boasted a thriving ecosystem of more than 10 lakh Micro, Small, and Medium Enterprises (MSMEs), more than any other state. The triple blow of demonetisation, GST, and the unplanned COVID lockdowns decimated the MSME ecosystem.

As…

— Jairam Ramesh (@Jairam_Ramesh) April 15, 2024

Third blow—lockdown

He said the NDA’s third onslaught on the MSMEs came just as the sector was recovering from demonetisation and GST with the lockdown devastating the MSME balance sheets and severely constraining demand even as the migrant crisis was constraining labour supply.

“MSMEs are India’s primary job creators. The devastation wrought upon them meant that by April 2020, Tamil Nadu’s unemployment rate had climbed to 49.8 per cent, the highest in the country,” Ramesh said.

“A July 2020 survey, conducted during the first phase of the COVID-19 pandemic, indicated severe financial stresses. 31 per cent of MSMEs were considering seeking credit from predatory money lenders as commercial banks refused to lend to them,” he added.

The Congress leader said that 55 percent of the MSMEs laid off workers during the pandemic, with 20 percent reporting that they laid off or had planned to lay off over 50 percent of their workforce.

At the national level, the Modi government’s crony capitalism has meant a deliberate neglect of MSME issues, he alleged.

“While large corporations have received massive loan write-offs worth ₹16 lakh crore, the MSMEs have received no such relief,” Ramesh said.

“The Tamil Nadu Small and Tiny Industries Association (TANSTIA), the apex body of MSME associations in the State, demanded that the Union government create a separate Income Tax bracket for MSMEs to distinguish them from large corporate firms. Their pleas fell on deaf ears,” he added.

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The government did not help MSMEs

Ramesh said the government has not intervened to help the MSMEs that face elevated raw material costs from the cartels of large-scale steel, aluminium, rubber and plastic manufacturers.

In the Kongu Nadu region, GST refunds amounting to nearly ₹1,200 crore are pending for around 2,000 viscose fabric weaving units, Ramesh said, adding that close to 500 units have closed because of the pending refund.

“The Coimbatore District Small Industries Association has sought a cut in GST rates on labour charges or job work undertaken by micro and small engineering units from the current 12 percent to either 5 percent or nil. The demand has not been met,” he said.

“MSMEs are India’s job creators. The unemployment crisis of today’s India is a Modi-made creation. The next time the BJP claims to be pro-industry or pro-manufacturing, it must introspect on the damage it has done to Kongu Nadu, one of India’s most important industrial belts,” Ramesh said.

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