PR firms in India cautiously examining new MSME classification announced by Government

 19th May 2020    PR Insight 
 Paarul Chand

Last week, the Government of India announced a slew of economic measures aimed at adding liquidity into the system. While the usefulness of these measures is still being strongly debated, PRmoment India spoke to the PR business in India for their views.

The easing of the cap on MSME

Among the biggest measures is reclassifying the Micro, Small and Medium Scale Enterprises (MSME) as per their turnover with higher caps. Firms with a turnover of 5, 50 and 100 crores now classify as micro, small and medium enterprises respectively, sharply up from the earlier caps of 1, 10 and 20 crores. This would make many medium-size PR firms in India eligible to register as an MSME firm as well. The registration comes with several benefits, chiefly access to collateral-free loans and a 45-day payment cycle that is mandatory. 

Nitin Mantri, Group CEO, Avian WE and also president of PRCAI and ICCO said, "This is part of the measures PRCAI had also suggested in a letter to the Government though we had asked for a higher turnover cap of 250 crores. This measure would allow MSME's to get automatic working capital as well as get their payments faster in a 45 days cycle."

Mantri added that the reclassification would make most PR firms in India eligible to register as an MSME firm if they wanted to explore that.

Kunal Kishore Sinha, founder-director, Value 360 Communications Pvt. Ltd said Value 360 is currently examining the details of the MSME package.

He also clarified that there are concerns regarding the mandatory 45-day payment cycle and how that would apply to clients who pay in a 50 and 60-day cycle.

Vineet Handa, founder and CEO, Kaizzen commented that "I think it is important to keep options open in the current scenario. As an industry, we are keeping a watch on how the reclassification will be implemented and we will take a call accordingly. At the moment, we would rather wait and watch. But, if the option works out, we can definitely consider it."

Handa adds, "From a communications industry point of view, it is a welcome move as we expect this to positively impact our MSME and start-up clients. This will help in the commencement of engagement and campaigns that were in recess/ on hold and also enables clients to release payments to their vendors, positively impacting the overall ecosystem. COVID – 19 has majorly impacted business models in our industry and we expect things to start getting back to normal, post these relief measures."

Rajat Grover, founder and CEO, of PR firm Elite Marque, says, "The big positive impact which I am seeing is that after this definition announced by the FM, newly or existing registered MSME will get a big relief in terms of their dues as they will get timely payments from the big companies to which they are providing the services."

But Grover warns, "This stimulus package for MSMEs can also bring a negative impact as the process is too simple today to register as MSME and the government has also announced collateral-free loans to them which maybe lead to failure of payments or more NPAs (Non- Performing Assets) in the future. However, the proposal has just been announced, further clarifications or changes will be provided by RBI by or before the next monetary policy."

Subhash Pais, business head-business impact at the RK Swamy Media Group also sounds a strong note of caution. Pais feels the MSME measures will help the manufacturing sector more than the services industry.

He says, "PR firms find it difficult to get an overdraft at banks sometimes. This new provision could most help PR firms with a turnover of 3 to 10 crores. But I doubt if they would get much love from the banks. In keeping with what the spirit of the economic package - talking about self-reliance; that's what PR firms will have to do."

Push to micro food enterprises 

Last week, the finance minister has announced an Rs. 10,000 crore scheme to formalise Micro Food Enterprises (MFE) and push for a 'vocal for local' with a global outreach to promote micro-entrepreneurship in India. This could impact 200, 000 MFEs.

Rajat Grover says the boost to micro food enterprises could also create more work for regional PR firms as well as boost regional media.

He adds, "In our nation, there is a lot of natural products have been made in small villages, but the problem in the past micro food brands were facing is reaching their consumer. This scheme will surely help the local brands to build credibility and visibility amongst the target audience globally."

Key sectors that will support PR

As some of the measures for MSME and MFE's will take time to show impact, Subhash Pais believes that healthcare, tech and finance will be the three pillars that will support PR."

Liquidity, not stimulus 

One widespread criticism of the economic package has been that it's focused on liquidity and not creating demand by putting money in the pockets of consumers. 

Kavita Lakhani, executive director, Golin Opinion, points out that, "The stimulus is more medium to long-term focused. Whereas our economy needs a more immediate dose of adrenaline booster. That could have been achieved by increasing the disposable incomes of households through cash transfers or tax concessions. The government needed to introduce measures to create demand."

Nitin Mantri agrees saying, "While the 25% reduction in TDS and the reduction in the contribution to EPF will certainly help with liquidity, there are no measures to boost demand. This is therefore not a stimulus package. Other markets like China, Europe and Australia are supporting companies directly at this time through contributing to salaries, etc."

Kunal Ajit Sinha also says the government should process the tax refund for the last two assessment years immediately, "It takes a year and a half sometimes to get our tax refund back. Due to advance tax payments, this can be a significant amount of money blocked. Don't forget that many companies are working on low margins.

Sinha also says stronger measures like reducing GST rates should also be considered, "This would also help make sentiment better. With better sentiment, businesses can perform better."