Coronavirus Lockdown: Small businesses struggle to pay wages; defer, cut salaries to workers this month

Small businesses account for nearly one-quarter of the country's $2.9 trillion economy and employ more than 500 million workers, according to government estimates

Reuters April 08, 2020 07:55:07 IST
Coronavirus Lockdown: Small businesses struggle to pay wages; defer, cut salaries to workers this month

New Delhi: Hundreds of thousands of cash-starved small businesses in the country have either deferred or cut their workers’ wages this month, say industrialists and union leaders, amid a 21-day nationwide lockdown to stem the spread of the coronavirus pandemic.

All India Manufacturers Organisation (AIMO)—an industry body representing some 100,000 small manufacturers—said more than two-thirds of its members faced problems in paying salaries on Tuesday, the usual day for paying monthly wages.

“We have no funds to pay wages,” said KD Raghunathan, former national president of AIMO, who runs a solar parts’ manufacturing unit in Chennai. “Our first priority is to pay electricity bills, rent, bank loans and social security contributions of employees,” he said, adding that they faced delays in payments from clients, including the government.

Federal and state governments and state-owned companies owe more than $66 billion to small businesses, the government told Parliament last month.

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Representational image. Reuters

The nationwide lockdown, set to end 14 April, has left millions of migrant workers stranded without any other source of income. And officials have warned that some states may extend the lockdowns as coronavirus cases rise.

India has so far recorded more than 4,200 coronavirus cases a death toll of 114 people.

Unemployment rising

Beyond delayed payments, exports have also been hit by the pandemic, and companies have faced over 50 percent cancellations in orders, said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO), nearly half of whose members are small businesses.

Among the worst hit are lifestyle products such as carpets, handicrafts and apparel, he said.

Small businesses account for nearly one-quarter of the country's $2.9 trillion economy and employ more than 500 million workers, according to government estimates.

Amarjeet Kaur, national general secretary of All India Trade Union Congress, estimates that more than 5 million workers have suffered a partial or full loss of wages.

The unemployment rate rose to 10.4 percent this week from 7.2 percent in early February, according to estimates by Centre for Monitoring Indian Economy, a Mumbai-based private think-tank.

Even workers who were able to access some government relief this week faced delays at banks.

On Tuesday, outside a Punjab National Bank branch in Agra, more than 100 people, mainly women, were queuing for a 500 rupee ($6.60) subsidy granted by the government during the lockdown.

“I need this to feed my children,” said Gyan Devi, a labourer. “Something is better than nothing.”

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