International MSME Day: Impact of COVID-19 on MSME and How the Government Helped

The epidemic of COVID-19 is the most important economic event in our generation. The pandemic that halted social and economic life during the spring and summer of 2020 has influenced nations and citizens alike, and it continues to do so.

According to the International Labour Organisation, the crisis has already converted into an economic and labour market shock, affecting supply and demand.

MSMEs, which are at the heart of India’s inclusive economic tale, have been severely impacted. MSMEs’ condition is deeply concerning because they are an integral part of domestic and global value chains.

However, the crisis has necessitated an approach that requires increased efficiency and accelerates modernisation for small enterprises, just as it did for other industries.

The news of a nationwide lockdown drew MSME owners, employers, and external stakeholders into an unanticipated circumstance in which no one had prior experience dealing with such a crisis.

The prolonged lockdown significantly influenced finished goods supply, raw material acquisition, and staff availability to work in production and supply activities. In addition, debt obligations, wages/salaries, statutory dues, and other issues plagued the sector from April to June 2020.

According to survey estimates, the pandemic disrupted MSMEs profits by 20% to 50%, with micro and small businesses bearing the brunt of the impact, owing to a liquidity constraint.

Some businesses have innovated by shifting their focus from non-essential items to vital commodities, such as hand sanitiser and toiletries, PPE kits, reusable masks, and so on, and have been able to weather the storm. On the other hand, MSMEs in remote areas experienced numerous challenges resulting from disrupted supply chain systems and intrastate lockdown provisions.

The economic downturn, along with border tensions, had pulled us back to self-sustaining principles, the Swadeshi dream. The Aatmanirbhar Bharat Mission was launched to address two pressing challenges at the same time: boosting MSMEs and reducing reliance on other countries. Six of the 15 relief measures announced as part of this package were solely aimed at empowering MSMEs, which are as follows:

  1. Change in definition of MSME
  2. Designating Fund of Funds for equity participation 
  3. Credit and Finance Scheme
  4. Relief in NPA
  5. Paying off debts to MSMEs 
  6. Prohibiting Global Tenders   

The Ministry of MSME is working to make these businesses more global and enhance the entire business environment by making it more hospitable and transparent for all parties involved. In addition, the sector has answers to significant problems such as unemployment, local economic development, fiscal deficit, trade balance, financial sector development, and SDG alignment, among others. Furthermore, the participation of the private sector in various bottlenecks of the value chain and supply chain system is crucial to the success of the government’s different policies.

In India, businesses of all sizes face challenges such as raw material procurement, finance needs, market linkages, quality, standardisation, pricing, business turnaround time, lobbying, and more. Therefore, new government actions are likely to function as a spur for the sector, not just in recovering from pandemic-related shocks but also in preparing for a brighter future.

Many firms have had to reinvent what their operations will look like in the future, and the Micro, Small and Medium Enterprises (MSMEs) sector is no exception. However, digitisation has been a critical driver of MSMEs’ growth for many years. As a result, experts say that many more MSMEs have shifted their main selling from traditional platforms to digital infrastructure, which is now more vital than ever.

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