Ease of Doing Business for MSMEs: A staggering 88 per cent of micro beneficiaries under the Prime Minister’s Employment Generation Programme (PMEGP) were ‘negatively affected’ due to the Covid pandemic, according to a recent study conducted by the programme’s implementing agency Khadi and Village Industries Commission (KVIC). Among the affected 88 per cent, 57 per cent stated that their units were shut down temporarily during the Covid period, while 30 per cent reported a drop in production and revenue. Under PMEGP, around 2.37 lakh micro-enterprises were supported with a margin money subsidy of Rs 6,833.32 crore from FY18 till February 28, 2021. The programme aimed at generating self-employment through the establishment of micro-enterprises in the non-farm sector.
KVIC Chairman Vinai Kumar Saxena wasn’t immediately available for comments on the survey results.
“While Covid is among the key reasons for the impact on enterprises but isn’t the only one. Impact on small businesses is a case of multi-organ failure. Demonetisation, GST complexities, etc., were other reasons continuing to haunt MSMEs. Covid must have impacted around 20-25 per cent MSMEs who either reduced their production or shut their operations but issues around GST compliance and demonetisation have been other major reasons,” Vishwanath, Co-Chairman, Industry Committee, PHD Chamber of Commerce and Industry told Financial Express Online.
MSME Minister Nitin Gadkari sharing the KVIC data around Covid impact on MSMEs in a written reply to a question in the Rajya Sabha on Monday also noted that the remaining 12 per cent of PMEGP beneficiaries benefitted during the Covid-19 pandemic. Among these beneficiaries, 65 per cent stated that their business increased as they had units in the retail and health sector while around 25 per cent stated that their units benefitted as they were dealing with essential commodities or services.
However, there was no government data available around the overall number of MSMEs that were shut down in the past year due to Covid. “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,” said Gadkari.
Meanwhile, gross bank credit deployed to micro and small enterprises in December 2020 has jumped 6.6 per cent to Rs 11.31 lakh crore from Rs 10.61 lakh crore during the year-ago period, according to the RBI data. MSME sector accounted for a share of around 18 per cent in the total credit to the industry and around 5 per cent in the total non-food credit extended by the scheduled commercial banks in November 2020, as per RBI data.