What About India's MSME Sector: COVID-19 Pandemic and Indian MSME Sector Outlook
12 Pages Posted: 1 Nov 2020 Last revised: 16 Mar 2021
Date Written: June 12, 2020
This paper talks about impact of COVID-19 induced triple crisis (supply chain, demand chain and labor disruption) on India's Micro, Small, and Medium Enterprises, which is one of the key driver of Indian Economy. MSME's are the backbone of the economy employing more than 11.10 crore workers in non-agricultural activities across country, and accounts for about half of India's exports. On the background of health emergency, the MSME units are in a distressing situation as severely constrained demand has contracted their revenue. The pandemic further exacerbate myriad of problems to the sensitive MSME sector as their liquidity comes from daily demand for their product, and they don't have huge cash reserves. With sustainability of MSMEs at stake the prospects of economic development of India presents a very gloomy picture considering MSMEs contribute about 30-35% to the GDP. Their closure could lead to a structural problem in economy while widening the inequality gap. The aim of study is to assess the impact of demand, supply and liquidity shock inflicted by corona virus on India’s fragile MSME sector while suggesting recovery measures to the government.
Keywords: Micro, small and medium enterprises, MSME sector, COVID-19 pandemic, economy, manufacturing sector, labor shock, supply shock, demand shock
JEL Classification: A22, G01, G00, G18, H11, H12
Suggested Citation: Suggested Citation