If govt does not take immediate fiscal steps, MSMEs will die: Pronab Sen

Topics MSMEs | Indian Economy | Lockdown

“At the moment, the sense I am getting is that the government is in a wait and watch mode. A wait and watch is a bad strategy at the time of the crisis,” Sen said in his lecture, organised by the India Policy Forum.
Former Chief Statistician Pronab Sen on Monday said that the government was in a wait and watch mode in terms of taking fiscal decisions to revive businesses, which was not a good strategy in times of the crisis.

If the government takes too long to take fiscal steps, this may kill the micro, small and medium enterprises (MSMEs), he warned while delivering the TN Srinivasan Memorial Lecture, titled Data in Coronavirus Times.

“At the moment, the sense I am getting is that the government is in a wait and watch mode. A wait and watch is a bad strategy at the time of the crisis,” Sen said in his lecture, organised by the National Council of Applied Economic Research (NCAER).

He said that while the lockdown had created supply side shocks, these had transformed into demand side issues now when the lockdown was being lifted.  “The supply side issues with no production in the lockdown  led to loss of income which created demand side constraints,” said Sen, who is now the country director at the India Growth Centre (iGC).

"For two months, these businesses faced production issues and now if they face further three months of lack of demand, they will die," he said. He furt5her said, "If the government does not take fiscal steps soon to revive the economy,  MSMEs will have to shut shop."

Sen said that while the Reserve Bank of India was fast in taking monetary decisions, the government was slow in taking fiscal steps.

The observations by Sen came a day after the finance ministry came out with a progress card of the Rs 20 trillion Atma Nirbhar package. In it, the ministry said that Rs 61,987 crore had been disbursed to about 120,000 MSMEs  under the collateral free loans.

Sen said the government had created the conditions for businesses to survive to an extent. "This is now the time to take fiscal steps,"he said.

To a query from one of the panelists, he said that the transmission of RBI’s monetary easing was also partly due to a lack of fiscal decisions.

He said the progress of the economy was linked with progress in containing the disease, about which very little was known.


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