Ease of Doing Business for MSMEs: 5,907 businesses registered with the MSME ministry as micro, small and medium enterprises were shut during financial years 2020-21 and 2021-22 (till March 9, 2022) in the country, according to the government data. During FY21, 330 MSMEs got shut down. These included 155 Udyog-Aadhaar-Memorandum (UAM) registered units that were shut during April-June 2020 period and 175 Udyam-registered units between July 2020 and March 2021. UAM registration portal for MSMEs was replaced by Udyam Registration in July 2020. In the current financial year, the number of MSME closures jumped nearly 17x to 5,577 Udyam entities. The data was shared on Monday by the Minister of State for MSME Bhanu Pratap Singh Verma in a written reply to a question in Rajya Sabha on the closure of registered MSMEs.
Among the top five states, which registered maximum MSME closures in the current financial year, Maharashtra saw 1,608 shutdowns followed by 527 in Bihar, 521 in Tamil Nadu, 442 in Uttar Pradesh, and 435 in Gujarat. Among total MSMEs closed, 5,528 or 99.1 per cent were micro enterprises, 42 or 0.75 per cent were small businesses, and seven or 0.12 per cent were medium businesses.
“If we look at the total base of registered MSMEs, 6,000 would not be a very significant share. In fact, knowing the challenges MSMEs went through in the past two years, it is a relief that the number is not very high of MSMEs that got closed. However, this number could be higher if one takes into account entities that are not registered as MSMEs. Apart from Covid, lack of financial discipline, unavailability of the adequate workforce, high raw material costs, and others could also be the reasons for MSMEs to shut down,” Rajan Raje, Chair, MSME Forum, Bombay Chamber of Commerce & Industry and Group CEO at agrochemicals company Nichem Solutions told Financial Express Online. So far, 77 lakh MSMEs have registered on the Udyam portal since its launch.
Comments from the MoS office weren’t immediately available for this story.
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However, in his response, Verma said the government has taken a number of recent initiatives under the Aatma Nirbhar Bharat Abhiyan to mitigate the negative impact of Covid-19 on small businesses in the country. These included Rs 20,000 crore Subordinate Debt for stressed MSMEs, Rs 5 lakh crore ECLGS scheme, Rs 50,000 crore equity infusion through MSME Self-Reliant India fund, new revised criteria for the classification of MSMEs, new Udyam portal for registration of MSMEs, and no global tenders for procurement up to Rs 200 crore.
Importantly, the National Small Industries Corporation (NSIC) had conducted an online survey of around 5,774 MSMEs in August 2020 to assess the Covid impact. According to the survey, 91 per cent MSMEs were found to be functional while only 9 per cent were closed due to the pandemic.
In January this year as well, SIDBI had conducted a survey among a random sample pool of 1,029 MSMEs. According to the survey, 67 per cent respondents reported temporary closure of business for up to a three-month period during Covid in the financial year 2020-21. The survey results were shared by the MSME Minister Narayan Rane in reply to a question in Lok Sabha in February. Over 50 per cent respondents had witnessed a decline of more than 25 per cent in their revenues during FY21 while around 66 per cent units had claimed a decline in profitability on account of stable fixed costs and a decline in revenue.
However, no survey has been undertaken yet to assess the Covid impact on small businesses in the informal sector. “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),” former MSME Minister Nitin Gadkari had said in a written reply to a question in the Rajya Sabha in February last year.