The nationwide lockdown in India, implemented to combat the spread of the coronavirus, has had a severe impact on small businesses. These businesses are struggling to pay their workers’ wages, leading to many having to defer or reduce salaries. The All India Manufacturers Organisation (AIMO), representing approximately 100,000 small manufacturers, reported that more than two-thirds of its members faced difficulties in paying wages on time.

K.E. Raghunathan, the former national president of AIMO and owner of a solar parts manufacturing unit in Chennai, emphasized the challenges faced by small businesses, stating that they have no funds to pay wages. He highlighted the importance of addressing essential expenses, such as electricity bills, rent, bank loans, and social security contributions, before paying employee salaries. Raghunathan also mentioned delays in payments from clients, including the government, adding to the financial strain. Recent data revealed that federal and state governments, along with state-owned companies, owe over $66 billion to small businesses.

The nationwide lockdown, scheduled to end on April 14, has left millions of migrant workers stranded without any source of income. As the number of coronavirus cases continues to rise, some states may choose to extend the lockdown measures, leading to a surge in unemployment rates. The Indian export industry has also suffered significant setbacks due to the pandemic, with companies experiencing over 50% cancellation in orders, particularly in lifestyle products such as carpets, handicrafts, and apparel, as reported by Ajay Sahai, the director general of the Federation of Indian Export Organisations.

Small businesses are a crucial part of India’s economy, contributing to nearly one-quarter of its $2.9 trillion GDP and employing over 500 million workers. Amarjeet Kaur, the national general secretary of the All India Trade Union Congress, estimated that more than 5 million workers have experienced either partial or complete loss of wages. Additionally, the unemployment rate in India has risen from 7.2% in early February to 10.4% this week, according to the Centre for Monitoring Indian Economy.

Even for workers who were able to access government relief, delays at banks have caused additional hardships. In Agra, outside a Punjab National Bank branch, more than 100 individuals, predominantly women, queued for a 500 rupee ($6.60) subsidy provided by the government during the lockdown. Gyan Devi, a laborer, stressed the urgency of the situation, stating that she needs the subsidy to feed her children.

The challenges faced by small businesses and their workers in India during the coronavirus lockdown highlight the urgent need for economic support and relief measures from the government. As the pandemic continues to disrupt global markets and livelihoods, addressing the financial strains faced by those at the heart of the Indian economy is crucial.

Useful links:
1. Government owes domestic firms $66 billion
2. Labour migration impacting banks and NBFCs