Govt Tries Soothing Fears Of Mass Layoffs By MSME’s Due Demonetisation

With business transactions dropping to abysmal low levels against the backdrop of demonetisation, some sectors reporting upto 80% business volume reduction, the government today sought to soothe concerns of mass layoffs in micro, small and medium enterprises (MSMEs) that employ 80 million people, saying the decision might cause initial problems but will not impact job scenario in the sector.

“There can be initial problems due to demonetisation, but after the currency flow regularises, it will help the sector,” Union MSME Minister Kalraj Mishra told PTI in an interview here.

Asked about apprehension of the Federation of Indian Micro and Small and Medium Enterprises (FISME) of layoffs in the sector, he said, “We are trying to instill confidence in them and talks are on… Our officers are on the job and we will find out a solution. There will be no impact in the sector and outcome (of demonetisation) will be good.”

also read: Modi Directs All Govt Ministries & Departments To Go Cashless

He added: “It’s a big decision of the Centre to curb blackmoney and people of the country despite initial problems are supporting the move.”

Mishra’s assurance came amid fears that a number of the 80 million people working in MSMEs are likely to lose their jobs due to the cash crunch in the economy following the withdrawal of Rs 500 and Rs 1,000 notes.

As per reports from Delhi, the unorganized sectors have already taken a hit, with reports of increase in people opting for Langars and free food offered at Gurudwaras and other religious places. With November ending and businesses continuing to reel under the cash crunch, the private companies have already started sounding their employees to expect for the worse. It may be noted that most Private companies, unlike govt sector, keep their hired manpower at just the optimum level and any reduction in business volumes eventually lead to employees getting axed and fired.

MSME companies are therefore planning to take up the demonetisation issue with Finance Minister Arun Jaitley in their pre-budget meeting so that the Centre could review the situation immediately to ease cash supply.

The MSME sector, which has already been hit by a slowdown in exports and costlier credit from banks, is feeling the biggest pinch of the cash squeeze.

Sources said several of these small units have no cash in hand and could resort to large-scale retrenchment.