Small and medium enterprises in the service sector require special attention: Rajiv Kumar

New Delhi: Small businesses in contact-intensive service sectors such as hospitality have been hit much harder by the coronavirus pandemic than large corporates and therefore deserve special attention, said NITI Aayog vice president Rajiv Kumar.

The manufacturing sector has been important, but micro, small and medium enterprises (MSMEs) in the service sector also face their own challenges and deserve special attention, Kumar said during a virtual conference on sustainable development of MSMEs organized by the Institute of Industrial Development Studies, a think tank and United Nations Industrial Development Organization.

Kumar referred to the government’s recent decision to include wholesale and retail traders in the MSME category as a step taken in this regard.

“Yes, production is important. However, a large number of small and medium-sized enterprises also operate in the service sector. The government’s recent decision to include wholesale and retail trade in MSMEs is a signal that they too need modernization and that they too face challenges, just like in the manufacturing sector, he said. The impact of the pandemic has been severe for this sector. Kumar said.

One of Kumar’s concerns was his disproportionate influence on smaller companies. “It has led to a kind of unfair increase,” he said.

Large corporations announced better results, while many small companies in the contact-intensive services industry suffered, he added. Kumar said SME profits have fallen by as much as 50% in large segments of the sector.

“Unfortunately, a very large number of businesses have not been able to keep up with the changes and have gone out of business, especially in what are called close contact service areas… I think they are much more deserving of our attention,” Kumar said.