Let’s face it! The MSMEs in India are one of the greatest drivers of the economy, so much so that they contributed around 29% to the overall GDP in 2019.

However, with the onset of the COVID-19 pandemic, the subsequent lockdowns dragged the entire MSME sector in uncertain waters. In fact, surveys showed that over 95% of the business owners were negatively impacted by the lockdowns.

With that said, every plague has its renaissance. And with the COVID-19 numbers dwindling, things are finally looking positive for the MSME sector in the coming months.

Let’s discuss the pandemic’s impact on MSMEs and how the sector is recuperating from the damage.

Additional Read: Why Reviving SME & MSME Sectors Should Be Top Priority Post Pandemic

COVID-19 impact on MSMEs

With the pandemic’s negative impact on procurement of raw material, supply of finished goods, and availability of employees to work in supply processes and production, the MSME sector was undeniably the worst-hit industry.

For instance, the apparel industry alone lost around Rs. 150 crores in the first two lockdown months. On the other hand, the leather industry filed records in losses, valued at Rs. 11,210 crores in the global market.

All in all, the impacts were devastating, with around 35% of the MSME sector losing any scope for recovery. But what factors led to these?

Well, Indian SMEs are primarily unorganised, with most of them dealing in cash. As a result, there’s no accurate transaction data available, and hence, no credit score. In the end, these businesses can’t apply for business loans to deal with financial crunches.

And the crunch brought on by the pandemic was so significant that these businesses didn’t have any access to working capital. This, ultimately, led to many shuttering their businesses for good.

Even the businesses that did qualify for a loan were charged exorbitant business loan interest rates, causing further financial distress.

MSME post-COVID scenario

To provide respite to the MSME sector, the government came forward with supportive programmes such as repo-rate reduction, emergency credit line guarantee scheme, PF and EPF support, and e-market linkages. Other than that, the government also introduced its e-marketplace (GeM) to enable businesses to improve work efficiency, foster product development, and reduce costs.

All of these initiatives have been showing positive results. Sales in the MSME have already reached 88% of the pre-pandemic levels, with entities such as restaurants and grocery stores finally finding their footing after two years of slump.

Lastly, many surveys have highlighted that more than 50% of entrepreneurs are confident about business recovery after the economic slowdown due to the pandemic.

Additional Read: How SMEs can manage their finances better post-COVID

Wrapping up

With things slowly returning to normalcy, the MSME sector will surely bounce back and reach heights more remarkable than even the pre-pandemic levels.

Become a part of this era with affordable business finance loans by Tata Capital. With our fast processing and easy eligibility, you can start a new business or grow your existing one with ease.

Use our business loan EMI calculator today to decide which tenure works best for you!

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