30 Dec 2020, 10:14 AM IST
The buzz around Covid-19 was growing from late February with reports of Coronavirus making it into the daily news cycle. However, no one expected this virus to become a pandemic and make the whole world come to a halt. The seriousness of the situation became clear when India went into a lockdown from March 25. People were asked to remain indoors under all circumstances. In all this, the worst affected were the poor migrant workers who were suddenly left jobless and some without food or money for more than a couple of days. As the lockdown period kept extending these workers had no other option but to head back to their villages. Most worked in micro, small and medium businesses, which had shut down and no one knew when things would start looking up.
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The government’s unlocking phase started slowly from May 17. Some factory owners decided to open but had no workers. To encourage reverse migration, factory owners decided to give incentives which included hiring people from nearby villages, offering extra wages, bonus, food, transportation and providing 15-day mandatory isolation quarantine. While some workers started returning to cities slowly the factories had to contend with a new kind of challenge, that of training the new people who had joined.
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The MSME sector had been under stress even before the pandemic. There were the challenges of payments not coming on time, lack of skill set and limited technology. Covid-19 wreaked havoc on this sector and most factory owners were finding it impossible to keep their businesses running. In India, SMEs are usually dependent on NBFCs as they have better coverage and last mile connectivity.
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What the government did
The government took several measures to help SMEs get back on their feet. Prime Minister Narendra Modi announced a package of Rs 20-lakh crore. The government revised the definition of MSMEs, bringing it in line with global standards. This was done with the hope that it will help MSMEs to scale up and generate more employment.
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One positive thing about this gloomy situation has been that SMEs rapid move to the digital world. Companies like Gimbooks, Razorpay, Cleartax and others have seen their users increase manifold during this time. Gimbooks has so far gained 10,000 paying customers. Razorpay launched Payment Buttons that enables businesses to add a single line of code on their website or blog and go live with an integrated payment gateway, in less than 5 minutes. Companies like Shopify, GoDaddy, Wix, Shopmatic and others helped SMEs sell their products online. Earlier this year, Amazon had announced plans to digitally enable micro, small, and medium businesses across the country as part of a $1 billion investment pledge and launched Local Shops. This offers shopkeepers and retailers with physical stores the ability to register to serve more customers from their local areas. Since the launch, more than 11,000 sellers have enrolled in the program.
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Despite all its struggles the SME sector remains resilient and hopeful. A survey conducted by American Express showed that a significant proportion around 80 percent of SME owners were optimistic that their business will survive the Covid-19 pandemic. Meanwhile, experts feel that the MSMEs will take at least around eight months to recover from the impact of the pandemic. The recovery rate of an enterprise will depend on factors like its rate of digitisation and the sector in which it is operating. The logistics and warehousing, metals, media and entertainment sectors will also take up to one year to recover and return to February 2020 levels.
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