67% MSMEs were temporarily shut, profits dipped for 66% in FY21: SIDBI survey

Ease of Doing Business for MSMEs: Over 50 per cent MSMEs surveyed witnessed a decline of more than 25 per cent in their revenues during FY21.

covid impact on msmes
Around 66 per cent units had reported a decline in profitability on account of stable fixed costs and a decline in revenue. (image: pixabay)

Ease of Doing Business for MSMEs: 67 per cent MSMEs, in a survey conducted by SIDBI late last year and announced last month, reported temporary closure for up to a three-month period during Covid in the financial year 2020-21. The survey was assigned by the MSME Ministry to SIDBI in September last year to assess the impact of change in MSME classification in 2020 on the sector and losses suffered by MSMEs due to the Covid pandemic. The survey results were shared by the MSME Minister Narayan Rane in reply to a question in Lok Sabha on Thursday. SIDBI surveyed a random sample pool of 1,029 MSMEs across 20 States and two union territories and submitted the study on January 27, 2022.

Citing the survey, Rane said over 50 per cent of the respondent MSMEs witnessed a decline of more than 25 per cent in their revenues during FY21. Moreover, around 66 per cent units had reported a decline in profitability on account of stable fixed costs and a decline in revenue. The study added that around 65 per cent MSMEs surveyed had availed the Emergency Credit Line Guarantee Scheme (ECLGS) and around 36 per cent had also availed loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. 

The government in June 2020 had revised the MSME definition amid measures taken to reprieve businesses of the Covid impact. For micro-enterprises, the limit for investment and turnover was increased to Rs 1 crore and Rs 5 crore respectively while for small enterprises, the investment and turnover limit was increased from Rs 1 crore and Rs 5 crore respectively to Rs 10 crore and Rs 50 crore. Likewise, for medium enterprises, the limit for investment was increased to Rs 50 crore and for turnover, the limit was increased to Rs 250 crore.

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Importantly, the government had no data for the number of MSMEs that were shut or job losses in the MSME sector due to the pandemic. In February last year, former MSME Minister Nitin Gadkari had informed Rajya Sabha that “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).” Likewise, Rane in November last year had told Parliament citing the same reason that data regarding job loss in MSME sector is not maintained “as MSMEs are present in both formal and informal sector.”

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