As Omicron hobbles recovery, India needs to rethink its digital policy to support MSMEs

As the world prepares to battle against the newest Omicron variant and India launching another blitzkrieg vaccination drive for the young and booster for the old, it is essential to formulate a strategy to equip small and medium businesses against the business disruptions that any potential lockdowns may invariably bring. The first and second lockdowns saw thousands of small enterprises being unable to carry out traditional businesses because of pandemic induced mobility restrictions, affecting their operations, balance-sheets and employment potential. As the WHO Director General Tedros Ghebreyesus alerts of a potential tsunami, and WHO’s Chief Scientist Soumya Swaminathan warns ‘Surge will be so fast’, it cannot be taken lightly.

It may sound a cliché that MSMEs are the backbone of India’s economy, jobs and exports. The first lockdown of 2020 saw a staggering 46% shrinkage in their businesses, witnessing a post-lockdown boom that was again halted by the second lockdown that took place in March-April 2021, which itself resulted in a business dip of 11%. It is imperative for the Government, Centre, and States, to formulate strategies, building up on the experiences gained, to provide a conducive business framework for MSMEs to ring-fence them and prevent further losses, who might not sustain the crippling economic effects of yet another lockdown.

One means of enabling small enterprises to continue their business operations would be to expand their business handling to incorporate home delivery, especially when offline shopping would be subject to limited operations. With proper covid-19 protocol being followed, including temperature checks of delivery boys and contactless delivery, there is no reason that small businesses remain excluded from embracing a modified, hybrid model that enables them to surpass the restrictions that real-time, offline shopping experiences bring. However, such feats can only be accomplished if small business owners and entrepreneurs are effectively and proactively on-boarded into the digital arena. There is a need for such effective policies and well-designed proactive efforts at various levels, especially in tier 2 and Tier 3 towns, and hinterland, to induce and enable MSMEs to embrace digitization to broaden their business prospects in these turbulent times. We must also give them support in techniques in digital management, inventory control to optimize costs,

and customer service. An accelerated roll out of digital backbone and infra, and boost in affordable smartphones will also be helpful.

To minimize any adverse effects, the third lockdown may have, not just on small business owners but also consumers, another facet that needs to be scrutinized is the classification of what we consider essential and non-essential. As per regulations, home delivery of only essential goods was permitted during the lockdown and goods that were classified as ‘non-essential’ were excluded. However, the purview of essential goods is predominantly relative, with its nature contingent on individual people, industries, and businesses, as opposed to a stringent criterion of absolute essentialism. Furthermore, in the value chain, everybody is a consumer. The need of the hour is not an arbitrary classification of essential items, but skilling and equipping small businesses to harness the power of digitization.

It is only through a combination of online and offline selling those businesses will be able to offset the losses that the pandemic might expose. Further, the retail policy for online and offline sellers must be uniform in the event of a lockdown so that there is a level playing field for all Indian business owners, rather than preferential treatment given to offline sellers, as occasionally witnessed in the past. In the present era, their destinies, in the entire ecosystem, are inextricably intertwined, from the perspective of consumers and choices available to them.

Considering that MSMEs account for almost one third of India’s GDP, it is crucial that the retail sector is protected from the limitations of limited offline business operations. Now more than ever, it is imperative to encourage innovative business models, capacity building and up-skilling programs, to train small entrepreneurs and safeguard them from the potential losses that swept the majority of the MSME sector in the first two lockdowns. Greater focus on logistics and delivery infra, and induction skilling of delivery boys can help in generating greater employment. Rx for a resilient and strong economy would be, if every business in the country, small and big, is privy to the wide plethora of opportunities that digitization can unfold, accelerating India’s quest to become a $5 trillion digital economy.

(The writer is formerly Chairman, Competition Commission of India and Executive Director for India at World Bank)

(The one-stop destination for MSME, ET RISE provides news, views and analysis around GST, Exports, Funding, Policy and small business management.)

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