The productivity growth for the micro, small, and medium enterprises (MSMEs), in particular, recovered sharply post the pandemic in the backdrop of several policy initiatives taken by the government and the Reserve Bank of India (RBI), a paper authored by the central bank staff said on Monday.
“The post-Covid-19 recovery trajectory indicates the resilience and catching up potential in the sector, which may have benefited from various policy measures undertaken by the government and the RBI,” the paper said.
The paper, titled ‘Covid-19 and Productivity Performance of MSMEs and Large Firms in India’, is authored by members of the Department of Economic and Policy Research of the RBI. The paper has used alternative estimation approaches to estimate firm level production functions for MSMEs and large firms in the Indian manufacturing sector for the period 2011-12 to 2021-22.
The paper said that productivity growth stagnated for the manufacturing sector as a whole, during the pre-pandemic period and dipped sharply in 2019-20. Thereafter, productivity growth recovered with sharper growth recorded in the MSME sector. The growth in productivity in 2020-21 and 2021-22 was in line with recovery in output (value added) in the manufacturing sector.
“Within industries, in the MSME sector, average productivity growth declined in the period preceding the pandemic across major industries barring some labour-intensive industries and computer manufacturing,” it said. The paper found micro and small firms to be more labour-intensive.
Meanwhile, prior to the pandemic, large firms generally saw marginal positive productivity growth across various industries. Following the pandemic’s onset, this growth further increased, notably in sectors such as transport equipment and computers, which recorded the highest growth rates, the paper said.