Updated: Apr 22, 2020
Mr. Narendra Modi
The Prime Minister of India
Sub: Wage subsidy scheme for Employers
The decision taken by you to lockdown the nation, to arrest the spread of the highly infectious novel Corona Virus, followed by the inspiring steps to uphold the confidence level of the nation by calling for showing the gratitude towards the health workers and to light a candle to show the solidarity of the nation during these hard times is not only laudable but very courageous also. Needless to say, you had stepped into the role of a true leader and paraded the nation to right path without any mayhem.
It is remarkable to note that, not only you had taken timely measures to hold the tight grip over the harmful disease, you had ensured that the financial stream of the nation is not getting dried up due to lack of fund flows by enabling the Reserve Bank of India to act freely, also. The direct cash transfer scheme and other benefits extended during the lockdown period and the “moratorium” on all types of loans for a period of three months was really great and will surely support and assist the agrarian sector and lower income population of India. The individuals and organizations , who are exposed to loans, will be directly benefited through the moratorium declared.
While declaring the lockdown on the entire nation you had urged to all the employers to show kindness to their employees and requested them to pay the salaries without any break. Employees are the backbone of all the organizations and there is no doubt about that. Employees are the flagship holders of a successful organization and hence it is very important to protect them and ensure that at least basic salaries are paid to them during these hard times. The MSME’s are the second largest employment generator, just below the agriculture sector, and provides employment to more than 120 Million in India. The MSME sectors contributes around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities and contributes 45% of the overall exports of India. The MSMEs spread across the nation in 36.1 million units and working as the strong backbone of the Indian Economy. The role of MSME’s to lead India towards $5Tn economy is immense and crucial.
At this juncture, I would like to bring to your kind attention that, majority of MSME’s in our country are depending on their cash flows, generated though their regular business activities, to meet their day to day operational expenses and most of them does not have deep pockets to survive these dark days. Many of the clients/ customers of MSME’s had got drastically affected due to the stoppage of the business and consequently the income flow to MSME’s had reached a standstill point and resulted in a depleted revenue stream and ended up in dried up coffers. Due to the dwindling business and washed-out revenue, many of the MSME’s are now at the tipping point of a deep cliff and the solution for their survival will be a strenuous enigma, unless supported through unstinting loans and/or subsidies. Unlike many of the developed nations, our country does not have an inclusive social security measure to support all sections of her citizens. Though the majority of the MSMEs are willing to support their employees by offering uninterrupted salaries, the present financial situation may not permit many to do so due to wafer-thin level of productivity.
Though the sincere intention of the Government is to protect the employed populace of the nation by ensuring their wages, any compulsion on the employers to pay the salaries and upkeep the level of employment, without any governmental support, will devastate a large chunk of employers and uproot their establishments forever. The uncertainty that had gripped over the global economy, will loom as dark clouds in the skies of India also, at least for a period of 12 months post pandemic, and many of the employers and establishments will become part of the history by that time, unless there are timely and proper resuscitation measures from the part of the Government. If the present situation prevails for some more period, the employers will have no option but to lay off their employees and the same will spiral up the speed of the fall of the economy into further deeper levels.
The MSME and Corporate Sectors are contributing to the exchequer in the form of direct and indirect taxes and they are generating huge employment opportunities also. It is a fact that the tax money of the corporates, employers and MSME establishments are passing on to the weaker sections of the society in the form of subsidies and benefits. However the taxpayers are not getting incentivised in any stages of their journey and they are getting more burdenizsed by stringent laws and regulations. The steps to bring parity in the society through such schemes are welcoming but the contributors should not be left alone when they are facing hard times. In order to support the employers who are struggling due to decrease in revenue, the Government may roll-out a “wage subsidy scheme”. The said subsidy can be offered in lumpsum or in instalments for a period of at least 3 months to the employers and that will help them to meet their obligations towards employees and retain them. This will enable the Employers, especially in MSME sector, to stand straight during these bad times and bounce back once the economy is back to track. The wage subsidy may be extended with specific condition to retain the employees for a fixed time period.
Devising of a suitable “wage subsidy scheme” will directly benefit the employees as well as employers and also help the economy to pedal in a swifter manner in this stormy water to swim across the impending deep recession.
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