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MSMEs: An Analysis of The Covid-19 Epidemic, Financial Damage, and MSMEs Recovery
MSMEs: An Analysis of The Covid-19 Epidemic, Financial Damage, and MSMEs Recovery
ISSN No:-2456-2165
Abstract:- In developing countries like India, the role of Services Tax major contribution to the enhancement of the
micro, small, and medium enterprises (MSMEs) is very MSME sector.
vital in the all around development of its people. As most
of the jobs are created by MSMEs in developing It will take the place of complicated taxes like VAT,
countries. However, the extraordinary pandemic Service tax, entry tax, and other indirect taxes. MSMEs assist
unleashed by Covid-19 has wreaked havoc on the MSMEs to financial growth of developing countries by getting
sector, crippling many of them and needing immediate innovations. As well as producing new investment and
action to resurrect them. The Covid-19 pandemic has employment possibilities. The Micro, Small, and Medium
posed a danger to the MEs (Micro Enterprises) sector, Enterprises Act of 2006 defines micro, small, and medium
and any restart will inevitably face insurmountable enterprises. The current study aims to determine the influence
challenges such as a lack of funds, a dispersed and of MSMEs in India. After the 1930s Great Depression, the
transitory staff, communication difficulties, supply-chain year 2020 is regarded as the worst in world economic history.
stalemate, halting of trade in goods routes, and so on. This According to the IMF and World Bank, most countries' GDP
paper is an attempt to analyze the significance of MSMEs per capita would be lower than in December 2019.
in the complete development of the Indian economy to
determine the magnitude of damage incurred in various Objectives and Methodology of the Study
sectors as a result of the breakout of the Covid-19
pandemic and to propose some beneficial solutions to To focus briefly on the importance of MSMEs in the
alleviate the difficulties using secondary data collected. development of the economy of India;
To assess the degree of losses incurred in various sectors
Keywords:- MSMEs, the Covid-19 Epidemic, Financial as a result of the breakout of the Covid-19 pandemic; and
Damage, and me Recovery To offer some beneficial ideas for the restoration of the
micro enterprise sector.
I. INTRODUCTION
The study made use of secondary data obtained
The Covid-19 outbreak also caused chaos on Indian primarily through access to many government “agencies”,
economy's diverse sectors, particularly SMEs. MSMEs are websites, policies, and programs, such as the printed Annual
said to be the backbone of the developing country, which was Survey Report, Journal articles, and handbooks.
nearly devasted during the COVID-19 pandemic the impact
of which can be felt in almost all the sectors Micro II. LITERATURE REVIEW
Enterprises (MEs) have made a significant contribution to the
economy of India in terms of job creation, regional According to Mills and McCarthy (2014), investigated
inequalities reduction, equitable economic growth, and both the recurrent influence of the depression on small
increased export potential. MEs are an important economic businesses and credit access, as well as various structural
sector because they are an essential part of the product supply concerns that are impeding the complete recovery of
chains. Before the COVID-19 epidemic, these firms produced commercial bank markets for short-term loans. Small trades
roughly 30% of the country's GDP, 40% to 50% of exports, were hit hard by the expulsion, contributing to more than 60%
and then helped nearly 114 million people, or about 30% of of all employment losses, as the crisis wreaked havoc on the
the gross workers. In the non-agricultural sector, there were banking system, particularly small enterprises.
around 63 million unincorporated MEs, most of whom were
micro-enterprises within the unorganized sector" (EPW, MSMEs, according to Chandraiah and Vani (2014), face
2020). a variety of challenges, including productivity loss, an
inaccessibility to banking and loans, infrastructural issues,
The increase in the expansion of the MSME sector reversed tariff structures and availability of raw materials,
should be the emphasis of the Goods and Services Tax. With manufacturing equipment obsolescence, marketing issues, a
the advent of the Goods and Services Tax, SMEs are excluded lack of skilled workforce, extreme competitive pressure, and
first from the country's services tax. Advantages include ease late payment. With low ability to recover, these businesses
of doing business and its growth. Playing with the Goods and find it difficult to take risks and deal with competition, which
According to FICCI (2015), the largest hurdle for Indian The catastrophic pandemic produced by COVID-19 has
MSMEs to develop, create, and produce the jobs has been resulted in massive losses in the MEs sector, with a lot of
access to capital. Small and medium enterprises (SME) credit them disabled or on the edge of extinction. In a poll
ever has assisted firms in meeting all of their business needs performed by All India Manufacturers Organization (AIMO,
that arise along the way without a problem. Credit control is 2020) on micro, small and medium firms (MSMEs), 35
essential in the long and good run of the firm, but it is percent of MSMEs, the majority of which are self-employed,
especially necessary in SMEs, as the degree of risk of believe their businesses have little hope of recovery and have
bankruptcy is much higher. begun shutting down operations. MSMEs have been struck
particularly hard by the COVID-19 pandemic lockdown,
According to Singh and Wasdani (2016), knowing the which has resulted in the interruption and closure of their
capital lifespan of a small company is relevant here in case of production plants, bringing economic activity to a halt.
MSMEs as they expand through personal loans, self-equity,
and either short- and long-term loans. The challenges also According to Roy (2020), as the employment provided
being experienced by them in obtaining financing, such as by cloth manufacturing units in the export sector is nearly
difficulties in obtaining collateral, hectic loan application 12.9 million and in them most of the workers (70%) are
processing times, a lack of awareness of various plans, and women. From March 2020 to May 2020 they sustain a loss of
other obstacles in determining the proper solution. Rs 150 crore due to the COVID-19 Pandemic.
As per the Annual Report (2017-18), of the Government As per the (Financial Express 2020) a loss of nearly Rs
of India provides an overview and performance of the MSME 35000 crore in the snacks and sweet industry of India.The
sector, as well as major findings from the NSS in 73rd round world market has been gripped by the COVID-19 Pandemic
survey on MSMEs during (2015-16), legal entities, as well as cost India's leather firms $1.5 billion in exports. Except for
other authorities under the MSME Ministry. The cluster the leather premises in Kolkata and Unnao (Uttar Pradesh),
development approach has been chosen by the Ministry as a which got clearance to re-operate, the country's leather
significant strategy for improving the efficiency and clusters were shuttered. The nationwide lockdown caused by
competitiveness in MSEs as well as cooperative in the the pandemic has a substantial short-term volume impact on
country. the cement business, with volumes expected to drop by 35-
40% in March 2020 based on present conditions. As a result
As per UK Sinha-led RBI Committee's report (2019), of disruptions in the worldwide supply chain and normal
recommended a stressed asset fund of Rs. 5,000 crores for operations, important sectors like electronics, vehicles,
domestic micro, small, and medium companies, among other entertainment, transportation,, and exports were in danger.
things (MSMEs). The development of a small value fund will The value of the Covid-19 shutdown is estimated to be US$
be organized to support units, as a help to small enterprises 120 billion (almost Rs. 9 lakh crore).
affected by demonetization, Goods and Services Tax (GST),
and a continuous cash. Money will go toward rescuing Wage payments to employees have grown nearly
MSMEs that have become non-performing assets (NPA) due unmanageable. Electricity, rent, and interest are all fixed
to changes in the external environment. costs that should be met. The company's working capital has
been depleted. It's easier said than done to restart production.
The aforesaid analysis indicates that, while several Although the devastating pandemic has impacted all
studies on the MSMEs sector have been undertaken, research industries, the MEs sector would be hit especially hard by the
on the effect the Covid-19 epidemic over MSMEs and, countrywide lockdown's diminished cash flow. The removal
challenges of getting back to normal position is exceptionally of migrant labor, limits on access to raw materials,
restricted. disruptions to exports and imports, and extensive travel
limitations, as well as the shutdown of malls, hotels, theatres,
Kumari (2017), stated that the Goods and Services Tax and academic facilities, have all harmed their supply chain.
will have an influence on working capital requirements,
financing costs, and pricing policy for small and medium In construction activities, there was almost complete
businesses. In the long run, the goods and services tax is shutdown for two weeks. During the 15-day shutdown on
expected to assist micro, small, and medium businesses. March 20, the loss faced by Mumbai Metropolitan Region
Mishra (2020), recommends taking significant policy amounts between (Rs. 5050 to Rs 6500 crore), with a “1/4"
actions to ensure long-term growth of the economy. He percent drop in property registrations. Between January 1 and
predicts a decline in FDI and capital, as well as far-reaching March 15, 2021, the region only managed 9,300 home
consequences for local businesses and multinational registrations, compared to 12,800, in the 1st quarter of 2019.
corporations.
REFERENCES