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Covid is big trouble for small businesses


, ET Online|


16 Nov 2020, 11:37 AM IST



Not weaving a fortune


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Not weaving a fortune



The Covid-19 pandemic has spelt doom for most businesses. Many have been forced to shut shop, others had to let go of their staff and announce salary cuts. But the SME sector and particularly the cottage industry was the worst affected. This industry includes cotton weaving, silk weaving, carpet making, leather industry, handicrafts industries is known as the hallmark of the Indian economy. This industry remains one of the most unorganised and decentralised in character.

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The promise


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The promise



To minimise the damage caused due to the pandemic to different sectors, Prime Minister Narendra Modi had called for Atmanirbhar Bharat in May. He had spoken at length about supporting locally made products. He had also announced a Rs 20-lakh crore economic package aimed at making the country self-reliant across key areas. This was aimed to cater to various sectors, including India’s cottage and home industries and SMEs. But this hasn’t helped the industry to recover in any way.

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The gaps


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The gaps



The biggest issue still remains the same, lack of funding. This is the weakest link of the cottage industry firms and experts believe that the government’s latest help in the form of the Emergency Credit Line Guarantee Schemes (ECLGS) scheme does little to change the status quo. They add that the Atmanirbhar Bharat package wasn’t a relief as it technically was just an additional loan facility for those who are a part of the formal financing chain, but it does little for micro businesses that run out of homes and have no recorded financial footprints.

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Lack of tech knowledge


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Lack of tech knowledge



A significant share of Indian cottage industries exists in its tier 2/3/4 cities, where a lack of proper business training is observed. Also, in technology adoption, they still are led by an old school of thought. Consequently, their merchandise aren’t able to compete with global peers. Domestically too, such firms remain in a no-win situation. According to the Indian Chamber of Commerce (ICC), the core issue facing cottage industry is lack of demand, which in turn affects the whole Indian economy. Cheaper imports of raw material, capital goods, especially from China, have been flooding the domestic market. This has left no room for domestic players to attain self-reliance.

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Quick access to funds


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Quick access to funds



The cottage industry needs immediate cash to be pumped into its system. Most of these industries work from remote areas of the country and giving money to them is a challenge. The key to a revival lies in the availability of funds and comprehensive cross-channel intervention, including NBFCs and microfinance institutions, adds the representative of VFS, which lends extensively to the cottage industries.

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The key to change


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The key to change



What will work in this industry’s favour is when more people get inspired by the Atmanirbhar Bharat call. Localisation holds the key to the sector’s self-reliance, that’s the common view held by the industry’s stakeholders. Things won’t change overnight, but if unit owners take a firm view that they will only prefer local supplies, the ecosystem will soon see a radical shift.

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Covid is big trouble for small businesses Covid is big trouble for small businesses Reviewed by TechCO on 11/19/2020 Rating: 5

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