Covid impact on MSMEs in FY21
GS Paper - 3 (Economy)
Two-thirds of Micro, Small and Medium Enterprises (67 per cent) in India were temporarily shut for three months or more in FY21 and over half of all MSMEs saw a decline of over 25 per cent in revenues, according to a survey of 1,029 enterprises by Small Industries Development Bank of India (SIDBI). The survey report was tabled in Parliament by MSME Minister Narayan Rane.
- The MSME Ministry had assigned the survey to SIDBI in September as part of efforts to assess the economic impact of the pandemic on MSMEs and the effect of the change in classifications.
- The Centre had, in June 2020, as part of its Covid relief package, revised thresholds for the classification of MSMEs upwards.
- Under the new classification, manufacturing and services units with investment of up to Rs 1 crore and turnover of up to Rs 5 crore are classified as micro businesses, businesses with investment of up to Rs 10 crore and turnover of up to Rs 50 crore are classified as small enterprises while units with investment of up to Rs 50 crore and turnover of up to Rs 250 crore are classified as medium enterprises.
- About 66 percent of respondents in the survey reported a decline in profitability on account of stable fixed costs and decline in revenue during FY2021.
- About 65 percent of the MSMEs surveyed, availed credit under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) which provided banks and financial institutions a 100 percent guarantee against any losses suffered by them due to non-repayment of the ECLGS loans by borrowers.
- The study also found that about 36 per cent of MSMEs surveyed had also availed loans under the Credit Guarantee Fund trust for Micro and Small Enterprises scheme during FY2021.