{"id":194952,"date":"2022-07-09T18:19:24","date_gmt":"2022-07-09T12:49:24","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=194952"},"modified":"2022-07-09T18:19:24","modified_gmt":"2022-07-09T12:49:24","slug":"delayed-payments-for-small-firms-stifle-economic-growth","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/delayed-payments-for-small-firms-stifle-economic-growth\/","title":{"rendered":"Delayed payments for small firms stifle economic growth"},"content":{"rendered":"\n

Source<\/strong>: The post is based on an article \u201cDelayed payments for small firm stifle economic growth\u201d<\/strong> published in the Indian Express<\/strong> on 9th<\/sup> July 2022<\/strong>.<\/p>\n

Syllabus<\/strong>: GS 3 Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development, and Employment; Inclusive Growth and issues arising from it.<\/p>\n

Relevance<\/strong>: Issues linked to Micro, Small, Medium Enterprises (MSMEs)<\/p>\n

News:<\/strong> In recent times, it has been reported that small business owners (MSMEs) are facing delays in payments from big companies and public sector units.<\/p>\n

Status of payments to MSMEs<\/strong><\/h5>\n

As per data, payments worth Rs 6.3-10.7 lakh crore were delayed to MSMEs during 2020-21.<\/p>\n

The average days for the delays of payment to micro, small and medium enterprises (MSMEs) were estimated to 194, 68 and 46 days respectively.<\/p>\n

What are the implications?<\/strong><\/h5>\n

There is an erosion of value, for every day that payment is delayed. It locks in the capital that could have been deployed gainfully. The problem is being largely faced by cash-strapped and credit-starved MSMEs.<\/p>\n

Micro and small enterprises<\/strong> borrow at comparatively higher<\/strong> costs<\/strong> and often operate in very competitive environments.<\/p>\n

The delayed payment led to the foregoing of business opportunities<\/strong> due to lack of liquidity or disrupted cash flows. This is detrimental to the specific firm or enterprise<\/strong> as well as a deterrent to the overall growth of MSMEs.<\/strong> The firms face uncertainty in terms of planning business cycles. <\/strong><\/p>\n

The other types of<\/strong> costs incurred by such supplier firms include the time spent, and<\/strong>\u00a0the personnel costs<\/strong> employed to recover payments<\/strong>.<\/p>\n

The problem of delayed payments gives buyers an advantage that the economy cannot afford.<\/p>\n

It increases the burden on the MSMEs<\/strong>. They are forced to work against the smaller supplier firms. <\/strong>Further, it also cripples economic activity for the vast majority of entrepreneurs in the country.<\/p>\n

What are the challenges in resolving such challenges?<\/strong><\/h5>\n

(1) Although, the government launched the SAMADHAN platform<\/strong>. But there are gaps in the implementation. There are close to one lakh complaints <\/strong>at present on the portal. But the disposal rate is low.<\/p>\n

(2) In addition, there are market-based solutions like TReDS<\/a>,<\/strong> supply chain financing,<\/strong> and in-time credit <\/strong>to ensure amicable supplier-buyer relations while easing cash flows for MSMEs. But the biggest impediment here is that they rest on two preconditions: (i) heightened formality of practices and (ii) buyers\u2019 intent<\/strong>.<\/p>\n

What should be done?<\/strong><\/h5>\n

(1) The government should bring regulatory interventions like <\/strong>shifting the onus of timely payments onto the buyer firms. The highest levels of government<\/strong> should issue statements that such delays are not in the nation\u2019s interest.<\/p>\n

(2)\u00a0 Efforts should be made to strengthen associations<\/strong> and credit practices<\/strong> of MSMEs. To quicken this, micro and small businesses need to coalesce and work towards gaining sustainable credit terms.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source: The post is based on an article \u201cDelayed payments for small firm stifle economic growth\u201d published in the Indian Express on 9th July 2022. Syllabus: GS 3 Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development, and Employment; Inclusive Growth and issues arising from it. Relevance: Issues linked to Micro, Small,… Continue reading Delayed payments for small firms stifle economic growth<\/span><\/a><\/p>\n","protected":false},"author":10308,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10500],"class_list":["post-194952","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704917691},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/194952","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10308"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=194952"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/194952\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=194952"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=194952"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=194952"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}