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Published in:
2022 | OriginalPaper | Chapter
Under Pressure: Integrating Policy Interventions to Save Distressed Indian SMEs of COVID-19 Aftershocks
Authors : Rashmi Rai, Lakshmypriya K.
Published in: Finance, Law, and the Crisis of COVID-19
Publisher: Springer International Publishing
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Abstract
The Micro, Small, Medium Enterprises (MSME) sector has one of India’s highest employment Indexes and is the launchpad for all genres and innovators. This sector is inclusive in integrating grass root level workers into tech innovators. There are about 63 million MSMEs in India, employing 110 million individuals. According to 2019 MSME reports, the sector contributed 29% to the overall GDP catalyzing socio-economic development.
The Covid-19 pandemics have left world economies and business entities to redefine and rethink policy regulations and business models. The pandemic has created socio-economic displacement across business sectors, and no country is free from the socio-economic exclusions that has triggered. The Indian economy has been badly affected by a projection of over a seven percent decline in quarterly GDP in 2021.The coronavirus pandemic has impacted MSME earnings by 20–50 percent, with micro and small organizations being the worst hit due to liquidity crunch. According to the survey conducted by Endurance International Group, many MSMEs have temporarily shut their operations or laid off their staff due to the inability to pay salaries.
Further, due to slip in demand and halted production, many had to vacate the rented premises where they were functioning. MSMEs seek government support to tide over the situation with policy interventions on tax discounts or exemptions and loans distributed at cheaper rates or zero interest rates. With the economic slowdown and global restrictions on business outsourcing, and border tensions with China, India revived its Swadeshi (ethnic) dream of Mahatma Gandhi. The Government launched Atmanirbhar Bharat Mission to boost MSMEs and thrust indigenous industries and processes to reduce our foreign nations’ resilience. Indian government policies are favourable because they have committed $50 billion to help small businesses survive and provide low-income workers with a $266 billion stimulus package of around two percent of India’s annual economic output. Aatmanirbharta’ which means self-reliance, has been chosen by Oxford Languages as its Hindi word of the year 2020 as it authenticated the everyday achievements of the countless Indians who survived the perils of a pandemic,” as stated in one of the popular daily newspaper.
The paper focuses on the issues and challenges faced by MSMEs in India due to the pandemic. Further, an analysis of changes in MSME definition presented in the Union Budget 2021 and various policy interventions by the Government and their impact on reviving in the MSME sector is presented.