Small companies fear large-scale lay-offs

A number of micro and small enterprises in the country have expressed fear that there would be large-scale job losses in the sector if the global recessionary trend continues, the Rajya Sabha was informed on Friday.

In a written reply to a question in the Rajya Sabha, Minister of Micro, Small and Medium Enterprises (MSME) Mahabir Prasad said "various MSEs associations have apprehended that if the present situation (economic slowdown) continues, it may lead to considerable lay-offs in the sector".

The minister, however, said there was no specific information on job losses in the sector.

MSEs associations have also made representations to the ministry with regard to credit squeeze by banks, high interest on loans, reduction in orders, delayed payments, he said.

MSME sector in the country employs over 42 million people. There are around 13 million small and medium enterprises, which contribute about 45 per cent of the country's industrial production and 40 per cent exports.

On December 7, the government had announced several steps including extending guarantee cover under on loans from Rs 50 lakh to Rs 1 crore (Rs 10 million) and reducing lock-in period for loans covered under the scheme from 24 months to 18 months for the MSME sector. The government had also announced sops on pre-and post-shipment export credit for SME.

The Reserve Bank had announced a refinance facility of Rs 7,000 crore (Rs 70 billion) for SIDBI to facilitate flow of credit to MSMEs.

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