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In FY21 67% of MSMEs were Closed Down Temporarily, and Half Lost 25% Of Their Revenue as a Result of the Pandemic

According to a survey of 1,029 firms conducted by the Small Industries Development Bank of India (SIDBI), two-thirds of Micro, Small and Medium Enterprises (67%) in India were temporarily closed for three months or more in FY21, and more than half of all MSMEs witnessed a revenue reduction of more than 25%.

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 fiscal according to the answer tabled in parliament by Rane. 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. At the end of 2021 the government had issued guarantees on loans of Rs 2.88 lakh crore under the ECLGS.

The study also discovered that approximately 36% of MSMEs surveyed had obtained loans through the Credit Guarantee Fund Trust for Micro and Small Enterprises scheme during FY2021. According to an online survey conducted by the National Small Industries Corporation, the challenges most frequently identified by MSMEs during the pandemic were cash issues, new orders, labour availability, logistics issues, and raw material availability.

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