80% of MSMEs to trim workforce: Report

A survey by the All India Manufacturers Organisation reveals that 72% MSMEs plan to shrink workforce to sustain business.


Less than 20 per cent of micro, small and medium enterprises (MSME) will continue with their existing staff strength, as per a survey report by All India Manufacturers Organisation (AIMO).

The survey revealed that over 70 per cent or around 72 per cent of the MSME enterprises were planning to reduce employee headcount to manage their businesses and get back on track. The report highlights the extent to which India’s job market has been adversely affected due to the lockdown following the COVID-19 outbreak.

India has over 65 million MSMEs employing more than 150 million people. Over 130 million people are self-employed. Startups account for 11 per cent of the total number of MSMEs.

The survey results were based on the responses collected from 46,562 respondents.

The survey was undertaken by AIMO in association with other organisations, such as Digitally 4 Empowerment (D4E), a social tech enterprise, and trade bodies such as Federation of Indian Industry (FII), Association of Indian Industry (AII), Cement Manufacturer’s Welfare Association (CMWA), Consortium of Women Entrepreneurs of India (CWEI), Federation of Indian Women Entrepreneurs (FIWE), First World Community (FWC), Chamber of Small Industry Association (COSIA), Amausi Industries Association, Lucknow (AIA) and Federation of Small and Medium Industries (FOSMI).

According to K. E. Raghunathan, the extent of job loss across the country will be revealed only by the end of August, 2020, as most respondents are in the process of gauging the number of returning employees and optimum employee strength required to sustain their business in the near future.

The report stated that 35 per cent of the MSMEs and 37 per cent of the self-employed respondents are pessimistic about recovering their businesses, and have begun shutting down operations.

Among the MSMEs, 14 per cent said there will be no reduction in workforce and another 14 per cent were uncertain. Among the larger corporate players, 18 per cent said they will not be reducing employee strength, while 40 per cent of the remaining were unsure.

The report by AIMO revealed that key concerns among the companies were demand forecast, collection of pending dues, raw materials, future EMI payments and salary issues. Money and manpower at a reasonable cost are the needs of the hour for quick revival of business.

The participants of the survey suggested that distribution of raw materials through Government undertaking, National Small Industries Corporation (NSIC), similar to a public distribution system (PDS) may be able to bring some relief. In addition, AIMO has asked the Government to allow banks to accept bill discounting facility for all sales invoices raised in the next three months, irrespective of the party being billed.

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