Timely steps needed to boost small

Context: The steps taken by the government to revive the economy has led to visible green shoot of recovery. However certain sectors are still facing a slump that needs short term support by the government.

Green shoots of recovery:

• Rising rural demand: Agriculture accounts for 16% of the GDP while providing for 60% of employment.
• Record Rabi output and procurement are expected to spur demand in the rural belts of the country.
• Tractor sales have risen by 4% compared to last year,

• Rebounding tax collections:

• Goods and Services Tax collections for June have rebounded to Rs 90,917 crore from a record low of Rs 32,394 crore in April
• Inherent limitations in terms of time and costs often restrict their real-time response.
• Trade Surplus: The country is likely to have its first monthly trade in June after 18 years.
• It reflects languishing imports due to slowdown and lower world oil prices.
• Exports are now about 90% of pre-COVID levels.
• Rising consumption:
• Power consumption is only 6% lower than the normal.
• Oil product consumption is back to nearly 90% of pre-COVID levels.
• Thriving E-Commerce: Major players showcase sales back to 90% of the normal times. 

Remaining concerns

• Non-inclusive revival: 
• Sectors like physical retail and Fast-Moving Consumer Goods companies are still facing a slump.
• Hospitality and aviation are in a tailspin.

• Declining future predictions: 

• Shrinkage of the economy by 4.5%, in line with estimates of the International Monetary Fund.

• A U- shaped recovery is predicted given the fact that the manufacturing sector is still struggling with low employment; merely 30% of industries have touched even 70% capacity.

Way Forward: 

• Provide greater comfort to small business: 

• The recent package to the micro, small, and medium enterprises (MSME) failed to provide relief.
• Understand how small businesses operate and provide relief accordingly rather than implement a mechanical policy of refreshing bank loans.

• Provide Short term Direct Benefit Transfer:

• The decision to extend food grains to the poorest is welcomed but must include those who have lost their livelihoods.

• This will bring a much-needed demand stimulus for the economy.

• Positive drive to push exports: Finalize free trade agreements that have taken years of negotiations like the one with the European Union.