During FY21, 67% of MSMEs who participated in a survey said they were temporarily shut — some for up to 3 months — due to the pandemic, MSME Minister Narayan Rane told the Lok Sabha in reply to a question on February 3. Over 50% of the respondent units witnessed a decline of over 25% in their revenues in 2020-21.
The Ministry of MSME had tasked SIDBI to undertake a survey in order to gauge the impact of the pandemic on the country’s small businesses. The findings were submitted to the government on January 27, 2022.
“Around 66% of the respondents reported a decline in profitability on account of stable fixed costs and a decline in revenue,” the minister said, citing the SIDBI survey.
Based on a sample pool of 1,029 MSMEs across 20 states and two Union territories, the survey revealed that around 65% MSMEs had availed the benefits under the Emergency Credit Line Guarantee Scheme (ECLGS). Further, around 36% had also taken loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises scheme (CGTMSE).
Referring to the SIDBI survey, Animesh Saxena, President of Federation of Indian Micro & Small and Medium Enterprises (FISME), said the last financial year was riddled with Covid-triggered challenges. The period gave a body blow to small businesses, particularly those that had no credit support and lacked access to institutional finance, he said.
“The government’s ECLGS brought a sigh of relief to only some — those with existing credit limits and outstanding loans. But thousands of small businesses could not benefit from the scheme as they had no prior financial history, which was a prerequisite for the ECLG Scheme. For such firms, this was the worst phase as many of them eventually got closed,” Saxena said.
Echoing similar views, Rajiv Chawla, Chairman of industry body IamSMEofIndia, said SIDBI’s findings were a reflection of the plight MSMEs faced during the last financial year. During the lockdown phase, lots of industries were closed down – at least for a certain period, Chawla said.
Highlighting that in the last financial year, April and May were “washout months” for many factories, he said that several MSME firms are not out of the woods yet.
The government should help the entrepreneurs and micro firms that are currently finding it tough to sustain their operations. “The survey puts the revenue decline for MSME firms at over 25% in 2020-21. But the reality is that beyond these average estimates, several sectors suffered revenue loss as high as 75%. For example, MSMEs in the service sector, the tour and travel industry, hotel and restaurants sector, entertainment, and services like gym, spa, etc, were deeply impacted due to Covid-19,” Chawla added.
Billed as the country’s key growth engine, the MSME sector employs 40% of the country’s workforce, contributes 30% of its GDP, and is responsible for 50% of India’s exports.
Interestingly, MSME Minister Rane had in November 2021 informed Parliament that there was no official record regarding job loss in the MSME sector as several small businesses fall under both formal and informal sectors. “As MSMEs are present in both formal and informal sectors, data regarding job loss is not maintained by the Government of India in the Ministry of Micro, Small and Medium Enterprises,” Rane had said.
Reference: https://economictimes.indiatimes.com/small-biz/sme-sector/covid-fallout-govt-says-67-msmes-were-temporarily-closed-in-fy21-industry-insists-blow-much-bigger/articleshow/89493562.cms
