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Effects Of Pandemic On MSMEs

With everyone working together putting aside our differences - we can all come out of this unprecedented situation stronger.

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Coronavirus issue has quickly spiraled out of control in various countries and has taken a toll on the global economy. Both small and large businesses are staring at significant losses on account of the pandemic and grappling to adapt to newer ways of doing business. This week, a lot of the small businesses in India began feeling the impact on account of Government mandated closures. The toll of Coronavirus is yet to be ascertained fully and MSME businesses are at very high risk of impact. 

According to the United Nations Conference on Trade and Development (UNCTAD) estimates, India will be the 10th most impacted economy due to supply chain disruptions in China. The State and Central Government in India are proactively taking steps to minimize the impact by shuttering malls, shops, gyms, schools and other areas where people gather in large numbers. Further, people are also avoiding travel due to stringent quarantine norms. Hence in the short-term, the brunt of the containment effect would be borne by small businesses who are restaurants, hotels, travel agents, shops dealing in non-essential goods and health clubs. Due to the diverse range of industries impacted by the lockdown, the number of such small businesses impacted would be great. 

The impact on small businesses will have a cascading effect on the people employed by small businesses, suppliers to small businesses which would be large businesses and banks or financial institutions in the coming. Hence, the entire economy will be impacted on account of the financial impact to small businesses in stages. It is already estimated that the Indian GDP would have a 500 basis point reduction on account of Coronavirus.  

Thus the Government’s proactive efforts to contain the spread of virus must be coupled with a plan of action for cushioning financial impact on MSME in the initial stages itself. If the Government is able to contain both the spread of virus and the financial impact on the first phase itself, India would have the best chance of recovering from this global pandemic. Compared to various other countries, the Indian Government and health care professionals have acted smartly and prevented the rapid spread of Coronavirus. Similarly, it is now time for the Government officials, financial professionals, bankers and Entrepreneurs to act proactively and quickly contain the financial impact of Coronavirus. 

The Government on its part to help small businesses is evaluating various options like lower-interest loans, tax breaks and reducing non-compliance penalties. Banks and financial institutions are also working hard to get regulations for smoother restructuring of loans and avoiding tagging of loans as NPA on their books. Entrepreneurs on their part must do their best to find ways to avoid impacting their customers by working towards home-delivery if their shop is closed, use digital marketing effectively to serve customers, do business online through digital channels and keep costs under control. A shop closed on account of Coronavirus doesn’t mean the business is closed. Entrepreneurs must continue to do business, try new platforms and modes. With everyone working together putting aside our differences - we can all come out of this unprecedented situation stronger.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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msmes coronavirus outbreak

Lionel Charles

The author is Founder & CEO, IndiaFilings

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