COVID-19’s IMPACT ON MSMEs

Small-businesses trying to weather the novel Coronavirus are facing severe problems because of the series of lockdowns that have prevented people from going out of their homes in the last couple of months. Also, due to the rapid rise in the infected cases, people are now terrified to trade with small businesses and are returning to big brands they know and trust.

The MSME (micro, small and medium enterprises) sector accounts for 33.4% of India’s manufacturing output, employing about 120 million and generating 45% of India’s export. With money hardly going outside the door, nearly 50% of MSMEs have witnessed a 20-50% drop in their earnings.

The survey conducted in May given below portrays the usage of various online services by consumers. Health-tech, Ed-tech, and online fitness have gained higher consumer base addition. As consumers are preferring everything online, businesses are understanding the fact that this is the new normal thereby leading to significant displacement in operating models of businesses especially in the MSME sector, large corporations have been able to adapt easily because of their large budgets. This has led to mass closure of small businesses and has made consolidation inevitable, resulting in these big firms gaining market shares from smaller and unorganised businesses.

Covid-19 has impacted a variety of different businesses, out of which personal services, hospitality, retail, and transportation industry have been hit the hardest, however, pharmacies and other medical businesses, software companies, and the gaming industry have been seeing record breaking profits. The real-estate business might be affected due to several reasons but majorly owing to a work-from home attitude that companies have developed throughout our lockdowns. These small businesses which are run either by an individual and family or few employees are now lacking capital. Especially personal services like hair salons and spas. The National restaurant association of India expects a drop from 30-35% for in-restaurant dining.

The government is taking countermeasures to combat the loss incurred due to the pandemic. The Prime Minister announced the MSME sector to be within the purview of the Atma- Nirbhar Bharat Abhiyan (ANBA) which intends to address the needs of the MSME sector and paves a path for long-term sustainability and profitability of MSMEs. Soon after, the Finance Minister announced six regulatory measures as part of the ANBA for the MSME sector.

Unemployment rates are at high levels in India, many workers have lost their jobs or faced a salary cut, Large industries have had to cut production due to a lack of demand in the market, and the cherry on top? This is just the beginning of the deepest economic recession the planet has ever faced since the Second World War.