India’s micro, small and medium (MSMEs) have seen dramatic job losses of 35 lakh in the last four-and-half years, according to a survey by the All India Manufacturers’ Organisation (AIMO). The job losses have been attributed to a 70% drop in operational profits since 2014. Further, Demonetization and Goods and Services Tax (GST) roll out are among reasons that impacted the sector.
The study shows that specifically, the trader segment saw a 43% decline in number of jobs since 2014, followed by a 32% drop in the micro-enterprises and 35% in small enterprises. The medium-scale enterprise segment, meanwhile, a 24% fall in the same period. Overall, the trader and the MSME sector saw a loss of over 3.5 million jobs since 2014, according to the survey, which which analysed over 34,000 traders and MSMEs across India between October 1 and 30, 2018.
The job losses have been attributed to a 70% drop in operational profits since 2014, said K E Raghunathan, president of AIMO in a statement. After a steady growth in jobs up until 2015-2016, the trader and the MSME sector were significantly hit by demonetization and the implementation of the GST, he said.
“The worst is the elimination of self-employed categories such as tailors, cobblers, barbers, plumbers, and electricians. Traders are closing down shops due to stiff competition from e-commerce sales, which implies loss of revenue in rental income for middle income families, the report said adding that the worst-hit were sectors dominated by unorganized labor, including plastic, matches, crackers, dyeing units, stitching units, stone units, tanneries, job work units and printing companies.
According to the report, “The year 2015-16 saw a growth in all areas of business due to high sentiment and expectations from the new leadership. It went down next year due to demonetization and then again, due to GST implementation and then [came the] difficulty in availability of funds and higher outstanding with government payments and compliance matters."
“Our survey is a clear indicator that the TMSME sector is in a critical condition at this moment and we feel the Government of India needs to address the issue with a lot more seriousness and urgency,” Raghunathan said.
AIMO has provided a list of suggestions to be implemented to create job opportunities based on the results of the survey. The survey, conducted by AIMO, covered over 34,000 TMSME representatives across India between October 1 and 30, 2018. There are an estimated 51 million MSMEs in India that make up over 40% of the country’s GDP. AIMO members include MSMEs in engineering, chemicals, pharmaceuticals, food processing and services sectors.