Summer earnings lost; need to back MSMEs for year-round sustainability

Himachal Pradesh is not merely managing a crisis. It is negotiating a transformation. Just a few days ago, the hospitality association wrote a letter asking banks to extend relief for tourism stakeholder borrowers rattled by a year of cascading disruptions. The core of the appeal is simple: Thousands of hotels, homestays, cafés and transport operators, who earn most of their income in the summer, have seen that season collapse. First, the world’s largest congregation, the Kumbh Mela 2025 diverted tourist flows. Then came the law-and-order shock of the Operation Sindoor, which froze what little momentum remained. And soon after, the state itself declared a massive natural disaster, formally recognised by the State Disaster Management Authority, Himachal Pradesh. Bookings vanished. Roads snapped. Revenues evaporated.

When relief is requested in such letters, the real conversation is not about a deadline. It is about the development direction of a hill state standing on an uncertain economic ground.

To understand the precarious situation of a hotel owner in Himachal, imagine this: A family invests its life savings into extending a small 12-room property in Shimla. The loan repayments are timed around seasonal income. Unlike plains or big metros where economic activity ripples year-round, the hills earn in one concentrated burst — summer. If that season falters, everything breaks: Salaries, supplier payments, electricity dues, room maintenance and eventually, loan instalments. It is not financial indiscipline. It is seasonal dependency written into the economic spine of the hills.

Now scale this story beyond the owner. When tourism stalls in Shimla, the pain radiates outward to orchard workers supplying fruit, to milk producers, to local drivers ferrying guests, to artisans selling shawls, to small cafés that survive on evening footfall, to temporary workers who return every summer exactly because the city’s economy circulates then. These micro-enterprises are not “side actors” in the tourism economy; they are its circulatory system. Their collapse is not individual failure. It is systemic bleeding.

A deeper layer

Himachal’s historical growth model was not birthed in boardrooms — it was built through strong public investment. The road networks, public schools, electricity grid expansion, health systems and rural linkages in the hills were shaped by a state-sponsored development paradigm that positioned the government as the lead investor, risk-bearer, and distributor of opportunity.

That arc swung sharply in the 1990s and 2000s, when neoliberal fiscal ideas re-engineered the state’s role. The Fiscal Responsibility and Budget Management Act introduced borrowing ceilings and mandatory deficit targets, disciplining public budgets into narrow corridors of spend. The broader policy frame of FRBM norms — adopted by states in different forms — further limited development expenditure. With Himachal already carrying one of India’s highest debt-to-GDP ratios, these rules made the state fiscally risk-averse and structurally incapacitated to invest at the scale it once did.

The outcome? The state retreated, and capital rushed in — not to circulate, but to concentrate.

Large hospitality capital exemplifies this shift. The Taj Hotels has made marquee investments in the state, deploying capital that can afford long gestation, sometimes decades, to recover costs and profit from land-heavy assets. Such projects are not “wrong” but they are revealing. Asset-heavy corporate hotels buy land once, lock it for generations, procure inputs centrally, and create a narrow employment cone. The local multiplier, the spread of earnings into drivers, growers, dhabas, cafés, craftsmen, brokers and seasonal workers, is comparatively thin.

This presents a policy dilemma that a common reader can understand: Should Himachal privilege capital that stays fixed in land and assets for decades, or capital that circulates through thousands of small owners, local supply chains and local labour every year?

In governance terms, this is Himachal’s transition question. In lay terms, this is Himachal’s survival question. My work on the Kerala Urban Commission and heading the growth drivers pillar demonstrated why supporting medium-small enterprises is not romanticism. It is hard economic logic. In the “Grow Drivers” chapter, which I led, the focus was clear: Smaller enterprises absorb more people locally, generate faster returns, spread ownership, deepen resilience, and embed progress socially, not just commercially.

In Himachal, these smaller units are categorised by institutions such as the MSMEs, an umbrella shorthand for medium and small enterprises. These are the hotels run by local families, cafés sourcing milk from nearby villages, transport operators hiring local drivers, homestays buying vegetables from the neighbourhood, small food joints employing youth who might otherwise migrate, and niche operators building economic ecosystems without acquiring large tracts of hill land.

Why does supporting MSMEs matter more during transition?

Because when the state cannot invest, its responsibility shifts from building new capital to protecting existing circulatory capital. The relief asked for in the hotel association letter — extension up to December 31 and the inclusion of stressed borrowers affected until June 19 — is therefore not merely banking relief. It is a one-time settlement that shields a model of distributed development that corporates alone cannot deliver.

If banks and policymakers fail to recognise that crisis causality matters more than paperwork timelines, we risk a future where capital is monumental but employment is minimal; land ownership is concentrated but enterprise is not; investment gestation is long but community returns are thin; hotels survive but towns around them do not.

Himachal is already in transition. But transition must not mean takeover. It must mean choice, a choice that preserves local enterprise, spreads opportunity, circulates earnings, and re-anchors sustainability where public spend has receded.

Relief is urgent. But the future is more urgent. We must support the small not because it is tiny on the balance sheet, but because Himachal must remain big in its development imagination.

(The writer is former Deputy Mayor of the Shimla Municipal Corporation.)