ISSN 2348-1218 (print) International Journal of Interdisciplinary Research and Innovations ISSN 2348-1226 (online) Vol. 8, Issue 4, pp: (122-125), Month: October - December 2020, Available at: www.researchpublish.com
Challenges and Opportunities for Micro, Small and Medium Enterprises Dr. Moumita Banerjee Faculty of M.B.A, Department of Commerce and Management, B. R. Ambedkar Bihar University Muzaffarpur, Bihar, India Email: moumita29dec@gmail.com
Abstract: The ongoing COVID-19 pandemic poses an extraordinary challenge to the Micro, Small and Medium Enterprise (MSME) sector since this sector mostly comprises „offline‟ enterprises relying on personal interaction and have much lower reserves of liquidity and less access to credit. The nationwide lockdown since 24th March 2020 is, therefore, certainly bound to break the back of the MSME sector. Given the widespread presence of MSMEs in the industrial and service sectors, the lockdown will have major interruption in the form of job losses, factory closures, manpower shortages in the urban areas due to the mass exodus witnessed during the early days of lockdown, increased bankruptcy and export order cancellations. The magnitude of the impact of COVID-19 has made many international organizations calling out for massive governmental support. A study carried out by ILO estimates the worst case scenario to be 24.7 million workers losing jobs, and the report mentions that “sustaining business operations will be particularly difficult for Small and Medium Enterprises (SMEs)”. A survey carried out by MSME industry associations in Tamil Nadu reports 44.7% revenue shortfall during the lockdown period. Given the smaller scale of operations and low level of digitalization, such entities may not be in an immediate position to adopt new technology and tele-working. Therefore, it becomes imperative on the part of government and financial sector to develop and implement multiple support systems for the enterprises in this sector. Keywords: Liquidity, manpower, bankruptcy, digitalization, tele-working, support systems.
1. ROLE OF MSMES IN INDIAN ECONOMY MSMEs are considered as the backbone of Indian Economy due to its contribution in terms of output, employment generation and exports. According to the latest estimates, MSMEs contribute nearly 30percent of the Gross Domestic Product (GDP) and 31percent of the Gross Value Added (GVA). According to the Annual Report for 2018-19 by the Ministry of MSMEs, there are about 63.38million enterprises in the MSME sector, of which 31 percent engaged in manufacturing activities, 36 percent in trade and another 33 percent in other services. It also indicates that the MSME sector employs 111million workers, which is around 21 percent of the total employment. This sector plays a key role in India’s export basket too. In 2018-19, the sector’s contribution to total exports stood at 48.1%. Recent estimates suggest that the sector contributes about 48% to India’s total exports. An interesting feature of MSME sector is the presence of vast number of micro enterprises (95%), while the small and medium units account for 4.8% and 0.2%, respectively. Despite its significant contribution, the MSMEs face multiple obstacles to growth. Among the various obstacles, access to finance is considered as the most pressing one. According to the Economic Census, 2013, almost 93% of the enterprises reported absence of institutional or non-institutional sources of finance. These enterprises with very little collateral or credit history face immense difficulty in obtaining formal finance. A look at the credit deployment to the MSME sector during 2016 to 2020 reveals that the sector bore the brunt with credit growth declining multiple times during this period. Part of this can be attributed to the demonetization drive, falling health of public sector banks and the introduction of Goods and Services Tax (GST).
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