Indian MSMEs: COVID-19 Horror Is Alive And Kicking

After the devastating impact of the second wave of ongoing Coronavirus pandemic, micro, small and medium enterprises (MSMEs) throughout India once again fearing stress. The World Health Organisation (WHO) has already designated Omicron “a variant of concern” with several mutations, which is acting as a fuel in the fire.

Talking about both waves, the MSMEs industry witnessed a serious downside. There are several businesses that are forced to shut down. Last year, according to a survey by MSMEx, more than 70 per cent of MSMEs confirmed that their business suffered a debilitating impact in the aftermath of the second wave.

“Risk is an inherent part of entrepreneurship and as true entrepreneurs, MSMEs must be cognisant of risks they may encounter in pursuit of their business objectives. Staying agile and adapting quickly to the changing business environment was critical for survival during the COVID-19 pandemic and MSMEs that were quick to respond with an appropriate course correction stood a far better chance of not just survival, but new growth opportunities,” said the CEO of Institute of Risk Management (IRM)- India, Hersh Shah. 

According to the survey by the Consortium of Indian Associations (CIA), about 73 per cent of SMEs could not make a profit during the last fiscal year (FY) 2021. The survey covered over 81 thousand self-employed individuals and Indian SMEs last year.   

“There is no denying that the COVID-19 pandemic and its accompanying economic crisis has been a tough and challenging time for the business community. Today, most businesses are striving for a return to normal functioning. However, this is a narrow view. Instead, they must seize this chance to experiment, collaborate and eventually adapt to stay ahead of the competition. Rather than limiting their objective to a safe operating environment, they must aim higher and build more robust and resilient organisations that can withstand such crises in the future,” said  Shah. 

The revival: 

In the MSMEx survey, a total of 50 per cent said that they are yet to fully recover from the devastating effect of both the COVID-19 waves. Approximately, 43 per cent affirmed that they had to change business models in order to generate revenue to sustain the pandemic. 

“The key to an all-inclusive MSME revival lies in enhancing Enterprise Risk Management (ERM) in the MSME sector. This holistic risk management approach empowers a business to stay vigilant for emerging risks even as it pursues new avenues of growth. MSMEs with good-quality risk and crisis management strategies are also more likely to earn greater trust from investors and banks, which can facilitate better access to financial resources,” said Shah. 

Rural MSME:  

MSMEx survey also revealed that a total of 150 MSMEs in India said that over 70 per cent of respondents suffered a ‘debilitating’ impact of the deadly second wave in India. Apart from that, 50 per cent said that the government schemes and incentives did not help them during the tough time of the pandemic. 

While talking about the Impact, Shah cited reports and said that initially almost 95 per cent were impacted negatively, however, at that time, even much larger businesses were affected. As India unlocked, this situation improved. Also, a Ministry of Micro, Small and Medium Enterprises survey indicated that around 91 per cent of MSMEs were functional by August 2020. 

“However, there are no studies that analyse rural MSMEs specifically, which comprise just over half of all MSMEs. Given that rural MSMEs face various challenges even at the best of times, the focus should remain on enhancing their access to financial resources, ease of doing business, and technology and infrastructure support, to enable them to continue contributing effectively to the country’s economy,” said Shah. 

The effect from Omicron variant:

As India now is battling third wave drive by the new Omicron variant, people from the sector are uncertain about the disruptions that this wave can cause, amid the increasing COVID-19 restrictions in every Indian city to control the outbreak. 

“Going by the evidence so far, the impact of the Omicron variant is unlikely to be as severe as the second wave. Its effect has been reduced because of our prior experience with such a crisis and some level of mitigation strategies that businesses have been able to build so far. However, risk management principles dictate that MSMEs must continue to exercise caution and stay alert for emerging threats, to respond agilely and leverage business opportunities,” said Shah. 

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