Small, medium issue: Economic recovery gaining steam. But low-income groups’ demand & MSMEs are concerns

Synopsis: Targeted support should be ensured to ensure desired growth of the sectors.

Introduction

Recent economic data shows that the Indian economy is bouncing back and is likely to exceed the pre-pandemic levels. RBI’s October Bulletin also indicated a GDP growth of 9.6% in the July-September quarter. But still, there are some sectors that are lacking in growth.

What are the improvements recorded?

Employment: The total employment estimate was at 406.2 million in September, almost at the level of the pre-Covid estimate of 408.9 million in 2019-20.

Salaried jobs rose sharply in September to touch 84.1 million, once again almost at the pre-Covid level of 86.7 million.

Advance tax collection in April-September 2021 was 14.6% higher than the pre-Covid collection in 2019-20.

What are the matters of concern?

Poor availability of Informal Jobs: MGNREGA Demand in the April-September 2021 period was higher than the pre-Covid 2019. This reflects the poor availability of informal jobs in the market. This may translate to poor purchasing power in rural India and might impact the economic recovery.

Increase in Personal Loans: During the second quarter of the current financial year, outstanding personal loans overtook industrial credit for the first time. Personal loans now makeup about 27% of the total credit, propelled mainly by home loans.

Fund crunch for MSMEs: MSMEs contribute about 45% of manufacturing output. The decrease in industrial credit shows the inability of MSMEs to get institutional credit.

Thus, there is a need for targeted support to ensure that the current growth momentum is maintained.

Source: This post is based on the article “Small, medium issue: Economic recovery gaining steam. But low-income groups’ demand & MSMEs are concerns” published in The Times of India on 1st November 2021.