India's ambitious plan to help small businesses does little to save them | The Business Standard
Skip to main content
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
    • GOVT. Ad
  • More
    • Subscribe
    • Videos
    • TBS Graduates
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Long Read
    • Interviews
    • Offbeat
    • Tech
    • Magazine
  • বাংলা
The Business Standard

Sunday
October 01, 2023

Sign In
Subscribe
  • Home
  • Economy
    • Aviation
    • Bazaar
    • Budget
    • Industry
    • NBR
    • RMG
    • Corporates
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
    • Book Review
    • Brands
    • Earth
    • Explorer
    • Fact Check
    • Family
    • Food
    • Game Reviews
    • Good Practices
    • Habitat
    • Humour
    • In Focus
    • Luxury
    • Mode
    • Panorama
    • Pursuit
    • Wealth
    • Wellbeing
    • Wheels
  • Epaper
    • GOVT. Ad
  • More
    • Subscribe
    • Videos
    • TBS Graduates
    • Thoughts
    • Splash
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • COVID-19
    • Long Read
    • Interviews
    • Offbeat
    • Tech
    • Magazine
  • বাংলা
SUNDAY, OCTOBER 01, 2023
India's ambitious plan to help small businesses does little to save them

South Asia

Reuters
13 July, 2020, 06:40 pm
Last modified: 13 July, 2020, 06:42 pm

Related News

  • The US needs India to buffer China, and Modi knows it
  • Termites devour 18 lakh Rupees in woman's bank locker
  • Blinken raised Sikh separatist murder with India's Jaishankar, US official says
  • Social media and private partnership: inside the changes at India's space agency
  • Indian protesters try to storm home of Manipur chief minister

India's ambitious plan to help small businesses does little to save them

Prime Minister Narendra Modi's programme to help small businesses back on their feet through $40 billion of government-guaranteed loans is too little and may not be enough to save the many companies that form the backbone of India's economy

Reuters
13 July, 2020, 06:40 pm
Last modified: 13 July, 2020, 06:42 pm
FILE PHOTO: Migrant workers and their families, who had left during a lockdown, walk at a platform after they returned from their home state of Uttar Pradesh, after authorities eased lockdown restrictions that were imposed to slow the spread of the coronavirus disease (Covid-19), in Ahmedabad, India July 1, 2020. REUTERS/Amit Dave
FILE PHOTO: Migrant workers and their families, who had left during a lockdown, walk at a platform after they returned from their home state of Uttar Pradesh, after authorities eased lockdown restrictions that were imposed to slow the spread of the coronavirus disease (Covid-19), in Ahmedabad, India July 1, 2020. REUTERS/Amit Dave

India re-opened for business in June after months of lockdown but for thousands of small entrepreneurs in the town of Meerut, near Delhi, the blow has been devastating.

Businesses from textiles to sports goods and furniture are shuttered or working at a bare minimum, and cows roam streets that would be normally packed with workers and vehicles.

Prime Minister Narendra Modi's programme to help small businesses back on their feet through $40 billion of government-guaranteed loans is too little and may not be enough to save the many companies that form the backbone of India's economy, nearly three dozen entrepreneuers Reuters spoke to across the country said.

Some said their business was so hamstrung by the pandemic that taking on new debt made little sense. They would rather the government had helped them by cutting the goods and service tax or waive off the interest on loans.

Others said that despite Modi's promise to open up the credit lines, it was not easy convincing bankers to lend because of the death throes their businesses were in.

Ashok, whose near 10 million rupees ($133,000) annual turnover company based in Meerut made steel furniture for hotels and schools, said he had fired eight of his 10 workers and was thinking of shutting down the operation.

"It would be better for me to close the unit than to run from pillar to post to get a loan," said Ashok, who did not want to give his full name.

He said his banker told him his creditworthiness is low as his business is struggling.

The Finance Ministry, which has made the loan support scheme the centerpiece of the rescue effort, did not respond to a Reuters request for comment on the problems faced by businesmen.

Small businesses that account for nearly one-quarter of India's $2.9 trillion economy and employ more than 500 million workers are the worst affected by the pandemic.

Nearly 35 percent of the 650 million small businesses across the country could shut down soon in the absence of government support, the Consortium of Indian Associations said in a letter to Modi's office seen by Reuters.

DOLE OUT LOANS

Bankers said there is government pressure to dole out loans, but businesses are not coming forward as demand remains tepid.

Till now, lenders have paid out 561 billion rupees, barely 19 percent of the sum earmarked, and approved loans worth 1,145 billion rupees since the third week of May, according to government data.

Businesses say that the lenders are either asking for increased paperwork or the ones in desperate needs are being deemed ineligible.

"I was asked to provide a collateral and also buy an insurance for getting this loan whereas it is supposed to be collateral free," said an entrepreneur in Modi's home state of Gujarat.

But two bankers said that securing money from the government even in a fully-backed sovereign guarantee scheme is not easy.

"The experience is unpleasant," said the former corporate head of a state-owned bank.

"You lend to most of these businesses only because government has directed but when it comes to getting back the money, one has to spend considerable resources and time which makes little sense," he added.

Businesses have been pushed to the wall as their suppliers have not paid and orders have trickled to zero while fixed costs including electricity, wages, installments for earlier bank loans have drained their funds.

"We have not got a single rupee relief from the government," said Sanjeev Rastogi, a garment manufacturer in Meerut who is running his factories at 25 percent of the production capacity.

Rastogi has incurred a loss of 3.5 million rupees in the last two months and believes he may have to close down his business in the next three months.

About 25 percent small factories out of over 10,000 textile units in Meerut could shut down and default on bank loans in the next few months, said Anurag Agarwal, chairman of the Meerut chapter of Indian Industry Association.

Rastogi is making last ditch efforts to remain in business.

"Otherwise, I will sell the factory at any price to save some money for my retirement."

($1 = 75.26 rupees)

Global Economy

India

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Paperfly aborts flight
    Paperfly aborts flight
  • Sketches of The Business Standard Deputy Editor Titu Datta Gupta and Deputy Executive Editor Shakhawat Liton
    From King Dollar to potato market, greedflation driving up inflation woes
  • Photo: Bloomberg
    Inflation cools in US and Europe

MOST VIEWED

  • BRACU, DU, JU, NSU lead Bangladeshi universities in World Rankings 2024
    BRACU, DU, JU, NSU lead Bangladeshi universities in World Rankings 2024
  • File photo of Rooppur Nuclear Power Plant/UNB
    First batch of uranium reaches Rooppur
  • Photo: BCB
    Shakib says he hasn't spoken with Litton since he broke his bat
  • Photo: Courtesy
    'No responsible captain could do that': Shakib directly blames Tamim for Afghanistan series loss
  • Khaleda Zia moved back to cabin from CCU
    Khaleda Zia moved back to cabin from CCU
  • BCL activist killed, 20 injured in AL-BNP clash in Chattogram
    BCL activist killed, 20 injured in AL-BNP clash in Chattogram

Related News

  • The US needs India to buffer China, and Modi knows it
  • Termites devour 18 lakh Rupees in woman's bank locker
  • Blinken raised Sikh separatist murder with India's Jaishankar, US official says
  • Social media and private partnership: inside the changes at India's space agency
  • Indian protesters try to storm home of Manipur chief minister

Features

The price back to the normal range is possible if the corporations who control the feed market reduce the feed and chick prices. Photo: Noor-A-Alam

Will eggs ever return to its 'normal' price?

22m | Features
Photo & Coffee Sketch: Touseful Isalm

A coffee conversation with Rumi

16h | Features
Photo: Collected

The top 3 smartwatches of 2023: A glimpse into the future

21h | Brands
In the Nannu Market area in Mirpur 11, there are 35 such shops that provide clothes-fitting services like shortening of pants, tightening of sleeves and shirts, and so on. Photo: Noor-A-Alam

How former RMG workers reinvent themselves as fitting tailors

18h | Panorama

More Videos from TBS

Shakib-Tamim: From best friends to bitter enemies

Shakib-Tamim: From best friends to bitter enemies

11h | TBS SPORTS
Many urban workers are moving to villages

Many urban workers are moving to villages

12h | TBS Stories
How China is reaping the benefits of war without adding fuel to the fire?

How China is reaping the benefits of war without adding fuel to the fire?

13h | TBS World
90% of beggars arrested abroad are of Pakistani origin

90% of beggars arrested abroad are of Pakistani origin

15h | TBS World
EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2023
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]