Large firms benefited at the cost of smaller, unorganised ones during pandemic

By Sanjeev Sharma New Delhi, Dec 12 : Large firms benefited in part at the cost of smaller and unorganised firms, and rising inequality is a scar that the Covid-19 pandemic is likely to leave behind, according to financial services house, HSBC.
“This could have happened in two ways. One, there has been a case of demand moving from small firms to large ones. Two, small firms tend to be vendors of large firms and delays in payment or non-payment of bills can hurt,” an HSBC report said.
“The rising inequality between large and small firms could also be a driver of the rise in individual-level inequality,” the report said.
It added that the corporate results in the quarter ending September were telling. Large listed firms saw a larger rise in profits. A combination of cost cutting, lower interest rate environment, access to buoyant capital markets and formalisation of demand are likely to have helped.
“Sadly, the smaller listed firms did not do as well. And the unlisted informal firms, typically with low economic buffers, are likely to have faced acute economic stress. In fact, it can be argued that large firms benefited in part, at the cost of smaller/unorganised firms,” HSBC said.
The report said that most worryingly, small firms are more labour-intensive than large firms. In fact, the informal sector employs around 85 per cent of the labour force. If small firms do poorly, it impacts a large number of people. Data show that small firms have cut staff costs by much more than large firms.