Impact of Covid 19 on Small Businesses in the Indian Economy

Introduction:
Covid-19 Pandemic has impacted the Planet in many aspects. India also one
among the most affected country due to Covid-19 Pandemic especially in Economic
factor as around 30% of the populations are in and around poverty line. The
continuous implementation lockdown as a result of day by day spiking of cases
shattered the economy of all the sectors. One of the most affected is the small
businesses sector.
Impact on Covid-19 on Small Businesses:
MSMEs (Micro, Small and Medium Enterprises) have been the one of the most
affected sector due to Covid-19. The primary reason is the small business firms do
not have the credit capacity to wait till the end of crisis. This has resulted in job
losses, which we have seen in the form of migration of workers between states
during the lockdown. According to the recent report by Kotak Institutional Equities,
only 7% of the small and medium firms in manufacturing category have the capacity
to survive for 3 months if the business remains closed. The businesses in the
forward and back-end linkages with these firms also affected, thus impacting 75% of
the Indian manufacturing sector.
In the Service sector side, the start-ups and other SMEs are greatly affected as
Covid-19 shattered the demand side for services sector. Consumption Expenditure
has come down drastically which directly affected the emerging start-ups, local
businesses and even the small businesses in rural areas.
The vicious cycle is Job losses due to closure of units, which has greatly
reduced the income in the hands of individuals due to job losses, which in turn
impacted the demand side of the economy. The Supply chain is affected due to
migration of workers due to job losses and credit crunch for the firms due to unit
closure. Also, the firms are facing the problem of reopening of units due to two
reasons - Credit Crunch and non-availability of workers.
Conclusion:
Relief measure by the government is the need of the hour. Credit guarantee
loans scheme for MSME by the government is a welcome step, but many loopholes
need to be addressed. The small businesses sector can be uplifted by providing tax
relief, interest subsidies on loans, providing liquidity in rural areas thereby boosting
the demand, etc., Central government and the respective State governments should
extend more support to save the backbone of the manufacturing sector from
economic stress.