Covid 2.0 crisis: Majority MSMEs don’t expect improvement in business activities in 6 months: Survey

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Updated: May 16, 2021 5:42 PM

Recovery of MSMEs in multiple sectors including retail, aviation, hospitality, and others, which were among the worst-hit due to Covid last year, was nearing the pre-pandemic levels before the second wave struck post-February.

textile industryThe RBI had in early May announced Resolution Framework 2.0 for individuals, small businesses, and MSMEs.

Amid business uncertainty due to the second wave of the pandemic, the majority of Covid-hit MSMEs don’t expect any improvement in their business activities over the next six months. According to a survey by credit rating agency Care Ratings, involving 305 respondents including small and medium enterprises between April 27 and May 11 to gauge the impact of ongoing lockdowns on economic prospects, 54 per cent expected the business conditions to worsen over the next six months. 34 per cent respondents expected no change in the business conditions while only 12 per cent anticipated an improvement in business activities.

Recovery of MSMEs in multiple sectors including retail, aviation, hospitality, and others, which were among the worst hit due to Covid last year, was nearing the pre-pandemic levels before the second wave struck around post-February, and cases swiftly started to climb up. For instance, according to retailers’ body Retailers Association of India, monthly recovery of the retail sector had neared pre-Covid level for the month of February with sales touching 93 per cent during the month in comparison to February 2020. The association had expected a full recovery in March. “The Retailers Association of India believes that the two most important and immediate steps that can prevent this industry from collapsing are to prioritize vaccination of the Last Mile Workers and to urgently provide financial support measures,” Kumar Rajagopalan, CEO, Retailers Association of India had said in a statement on Thursday.

Also read: Hospitality body FHRAI pleads PM Narendra Modi, others for fiscal measures to avoid ‘complete crumble’

According to the survey, 72 per cent felt of the MSME respondents said that the restrictions would cause labour supply shortages while 16 per cent respondents do not foresee labour shortages and 11 per cent were unsure. Amid such challenges, it was apparent that the majority (84 per cent) respondents believed that Covid resurgence has escalated business uncertainty. However, respondents were almost equally divided in terms of borrowings over the coming six months. While 41 per cent respondents said that they were not likely to borrow loans, 40 per cent responded in affirmative.

Even as MSME remains among the hardest-hit sectors due to lockdown restrictions, there is no official record maintained for the units shut during the lockdown by the government. “As MSMEs are there in both formal and informal sector, data regarding temporary or permanent closure of the units are not maintained by the Government of India in Ministry of Micro, Small and Medium Enterprises (MSME),” MSME Minister Nitin Gadkari had said in a written reply to a question in the Rajya Sabha in early February this year. Likewise, in September 2020 as well, MSME MoS Pratap Chandra Sarangi in a written reply to a question in the Rajya Sabha had said that “no such record is available” for the number of MSME units shut down during the March-August 2020 period of the pandemic. In fact, there is no data with the government on the number of MSMEs closed down from FY15 to FY20, Sarangi had added.

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