1

MAJOR RESEARCH PROJECT REPORT

ON
“A study on the impact of the COVID-
19 Crisis on the Indian Micro, Small
and Medium Enterprises”

Project Report Submitted to Mandsaur University,

Mandsaur
In Partial Fulfillment of Requirement for the Award
of Degree of
BACHELOR OF COMMERCE
By
“Mansi Mehta”

MANDSAUR UNIVERSITY Rewas-

Dewda Road, Mandsaur (M. P.) - 458001

MAJOR RESERACH PROJECT REPORT

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ON
A study on the impact of the COVID-19 Crisis on the Indian Micro,
Small and Medium Enterprises

SUBMITTED TO

MANDSAUR UNIVERSITY
In Partial Fulfillment of Requirement for the Award of
BACHELOR OF COMMERCE
FACULTY OF BUSINESS ADMINISTRATION &
COMMERCE “2019-22”
Submitted To: Mandsaur University Submitted By:- Mansi Mehta

Faculty Guide: prof. Ruben Shah Class: Bcom V se

DECLARATION

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I, Mansi Mehta, hereby declare that the Project Report ''A

study on the impact of the COVID-19 Crisis on the Indian
Micro, Small and Medium Enterprises” written and
submitted by me to the Mandsaur University, Mandsaur, in
partial fulfillment of the requirement for the award of
degree of Bachelor of Commerce under the guidance of
my faculty members is my original work and the
conclusions drawn therein are based on the material
collected by myself.

Place: Mandsaur
Name of student: Mansi Mehta
Date: 24/11/2021
Class : Bcom 5th semester

PROJECT GUIDE CERTIFICATE

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This is to certify that the training Report entitled “A study on the

impact of the COVID-19 Crisis on the Indian Micro, Small and
Medium Enterprises” which is being submitted herewith for the
award of the degree of Bachelor of Commerce of Mandsaur
University, Mandsaur is the result of the original research work
completed by Mansi Mehta under my supervision and guidance
and to the best of my knowledge and belief the work embodied in
this Report has not formed earlier the basis for the award of any
degree or similar title of this or any other University or examining
body.

Place: Mandsaur
Signature:
Date: 25/11/2021
Name of student: Mansi Mehta
Class: Bcom V semester

Acknowledgement

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I owe a great many thanks to a great many people who helped and
supported me during the writing of this summer training project.
My deepest thanks to Faculty guide name the guide of the project
for guiding and correcting various documents of mine with
attention and care. He has taken pain to go through the project
and make necessary correction as and when needed.
My deep sense of gratitude to organization / company guide
support and guidance. Thanks and appreciation to the helpful
people at [company name where the project was undertaken], for
their support.
I would also thank my Institution and my faculty members without
whom this project would have been a distant reality. I also extend
my heartfelt thanks to my family and well wishers.

Name of student : Mansi Mehta

Class : Bcom V semester

EXECUTIVE SUMMARY

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Micro, small, and medium enterpries (MSMEs) are playing a critical

role in the economic development as well as acting as an
important source of livelihood for millions of Indians. They are a
vital source of gainful non-farm employment for people,
particularly those living in rural areas. According to the Ministry of
MSME, the sector absorbs around 111 million workforce and is the
second largest job creator after agriculture. Being a highly
unorganised sector consisting of large number of micro-sized
units, the sector is highly prone to economic crisis. The lockdown,
which was declared in the last week of March 2020 owing to the
spread of COVID-19 and continued till 3 May 2020, considerably
impacted the economic activities of MSMEs. Some initial
assessments show that the sector faced an acute cash crunch,
shutdown of businesses, and large-scale.
MSMEs play a significant role in India. They contribute to the
domestic economy and significantly to the exports from India.
Importantly, they are the major source of employment in the
country. According to NSSO, there are nearly 63 million MSME
enterprises in the country. However, nearly all of them are
micro in size. Hence, most enterprises are subject to risks,
given their size. Most of these enterprises also employe
labour from other states. To contain the spread of the COVID-19
outbreak, the government, in March 2020, locked down a

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substantial part of the Indian economy. Except for essential

services, the rest of the country was shut down. This led to
substantial disruption both for the MSME enterprises and the
workers in these units. The "migrant crisis" as highlighted by the
media during March-April 2020 is a manifestation of this impact,
both on the MSMEs and workers. It was in this context of
disruptions that the objectives of this study were framed.The
objectives of the study were:
1. Gain information on the impact on MSMEs due to the COVID-19
pandemic-related market disruptions.

2.The purpose of this research paper is to analyse and evaluate

the performance of the Micro, Small and medium Enterprises
(MSMEs) during the pre-COVID and post-COVID period and how
has it affected the Indian economy. It also helps to understan the
various Government measures taken in order to combat with the
crisis faced by these enterprises.

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CONTENTS
Chapter I:
Introduction
Chapter II:
Review of Literature
Chapter III:
Objectives, Research Design & Methodology
Chapter IV:
Conclusion

Bibliography
Appendix/Annexure
Questionnaire (if)
Assessment Work Sheet
Financial Statement

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Introduction
Micro, Small and Medium Enterprises (MSMEs) play a significant role in
India by contributing to the economy through employment creation and
exports. There are estimated 63 million MSMEs in the country, providing
employment to around 120 million workers. However, most of them are
micro in size, and as a result subjected to many risks. In addition, there
are many unregistered
enterprises in the country, accounting for the bulk of the informal
economy. Albeit decent work deficits, they act as an important job
cushion for many. The impact of ongoing COVID-19 pandemic on these
enterprises, formal and informal, and the dependent wage and own-
account workers has been severe. The containment measures undertaken
by the government from March 2020, disrupted functioning of the
MSMEs and livelihoods of the workers. Decrease in demand led to
temporary or permanent shut down of enterprises, or businesses adopted
practices such as wage cuts or retention, job cuts or increase in working
hours. This has accentuated the vulnerability of many workers, in
particular the migrant workers. We will never forget their plight walking
back home from cities.The ILO’s four-pillar policy framework, based on
international labour standards, for tackling the socio-economic impact of
the COVID-19 crisis underlines the need for rapid and well-designed
policy measures to support enterprises, jobs and incomes.

An industrial survey which was conducted by the industrial body

recently, Federation of Indian Chambers of Commerce & Industry
(FICCI) and tax consultancy Dhruva advisors, projected that businesses
are struggling with "tremendous uncertainty" about the future. In this
survey, Covid-19 crisis caused a collapse in economic activities over the
recent period which cannot be paralleled. The revised Gross Domestic

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Product (GDP) for India is down by 0.2 percentage points for fiscal year
2020 to 4.8 per cent and by 0.5 per cent for fiscal year 2021 to 6 per cent.
Chemical Industry
Chemical plants have been shut down so there has been restrictions on
shipments and logistics. Research from Ambit says that the European
innovator plants catering to the pharmaceuticals and agrochemicals
continue to operate as these sectors are heavily dependent on chemicals.
It has been found that 20% of production has been affected by disruption
in the supply of raw materials.
Shipping Industry
According to the ET Bureau's report, Indian exports decreased by 35% in
March 2020, the largest contraction in almost ten years. The dry bulk
trade decreased by more than 75%-80% per day per vessel. However, in
order to ensure smooth cargo operations in the ports of India, the Ministry
of Shipping has sought the intervention of the Ministry of Commerce to
provide advice on the recognition of electronic trading documents.
Automobile Industry
Rahul Mishra, ET Auto reporter, said that Covid-19 would have a
negative impact of 1% to 2% on the expected growth rate. The
impact on Indian companies will vary and will depend on the extent of
the business with China. Import dependency on China will have a
significant impact on the Indian industry. If the shutdown in China
continues, it is expected to result in an 8-10 percent contraction of Indian
automotive manufacturing by 2020.
Pharmaceutical Industry
The exports contributes to 40% to 70% of supplies which are provided to
the WHO for vaccines for Diphtheria, Tetanus and Pertussis (DPT) and
other diseases like measles. As per a study done by Dr. Abhishek
Dadhich, IIHMR University, shows that active pharmaceutical
ingredients (AOIs) market is forecasted to earn a revenue of $6 billion by
the end of 2020.

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Tourism and Aviation

The Indian tourism industry is projected to lose revenue of Rs. 1,25
trillion as a fall from the shutdown of hotels and the suspension
of flight operations after the onset and spread of coronavirus. The
International Air Transport Association (IATA) has estimated a
worsening of the situation in the Asia-Pacific region, with an expected
loss of 29 lakh jobs in Indian aviation.

Micro, Small and Medium Enterprises

The finance minister, Nirmala Sitharaman, stated that the central
government had decided to change the definition of Micro, Small and
Medium Enterprises (MSMEs) in order to favour these enterprises as a
result of the losses suffered. In accordance with the Micro, Small &
Medium Enterprises Development Act (MSMED) 2006, MSME have
been classified into two categories of manufacturing and service
enterprises. The new definition is based on the categorization of the
manufacturing and service sectors and the composite criteria for dividing
micro, small and medium-sized enterprises will be based on investment
expenditure and also on annual turnover. The threshold is kept low so that
firms are encouraged to remain in size to reap the benefits of the new
schemes and policies that have been modified to recover losses that have
hindered the sector. Changes were made under the Atma nirbhar Bharat
Abhiyaan Economic Package to address the economic predicament of the
pandemic. Subina Syal's report states that MSMEs account for around 90
% of total enterprises in macro
economies and are credited with generating the highest rate of
employment growth.

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Definition of MSMES
Existing MSME classification
Criteria: Investment in plant and machinery equipment

Classification Micro Small Medium

Manufacturing Investment <Rs.25 Investment <Rs.5 Investment <Rs.10

enterprises lakh crore crore

Service enterprises Investment <Rs.10 Investment <Rs.2 Investment <Rs.5

lakh crore crore

Revised MSME classification

Composite Criteria: Investment and annual turnover

Classification Micro Small Medium

Manufacturing and Investment <Rs. 1 Investment <Rs. 10 Investment <Rs. 20

service crore and turnover crore and turnover crore and turnover
<Rs. 5 crore <Rs.50 crore <Rs. 100 crore

The idea of revising the MSME definition has been under the
consideration of the central government even before the onset of the
COVID-19 pandemic. It was reportedly opposed by small-scale
industrialists who perceived the threat of competition from larger
enterprises who would also become eligible for size-dependent incentives
like concessional bank credit. The economic crisis situation created the
right time to bring about the change without facing opposition from
certain interest-groups. The prevailing definitions of MSMEs that used
only the investment were widely believed to have discouraged the size
expansion of small enterprises. The new common definition of MSMEs
hikes the threshold investment level for the category Micro units to one
crore (approximately US$133,000 at current exchange rates) and brings

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in the turnover criterion of INR Rs.5 crores (approximately US$667,000

at current exchange rates). Under the modified composite definition an
industrial/service establishment will be classified as belonging to the
Micro/Small/Medium category if it falls below either of the two
criterions, namely, investment or turnover. In practical terms all units
with turnover value below ₹250 crores (approximatelyUS$33 million at
current exchange rates) constitute the MSME sector. If an establishment
crosses both the investment limit as well as turnover limit of the
respective category then that unit goes out of that particular category. The
intent of higher threshold is to encourage the growth of MSMEs by
inducing them to undertake greater investment and achieve economies of
scale and cost competitiveness.

Impact of the Covid 19 pandemic on the

MSMES
The MSME sector has been facing a prolonged slowdown. After the
global financial crisis in 2008, the growth of MSMEs slowed down and
hovered between 4 to 7 per cent annually. The recent slowdown in the
economy for various reasons also impacted the MSME sector in the
Indian economy. The growth rate in India had declined consistently since
2017-18. There was a decline from 8.2 per cent in 2017-18 to 7.2 per cent
in 2018-19, to 6.8 per cent in 2019-20, and was expected to be about 5
per cent in 2020-21.The MSMEs, too, were affected by this decline and
the COVID-19 pandemic, perhaps further aggravated this sector's
situation. This is an aspect that is examined by this study too. The
pandemic had disrupted manufacturing supply chains and sharply
curtailed commodity demand. Though a business could open after a

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period of lockdown, many struggled to get back to their pre-COVID-19-

pandemic situation. This aspect is examined in this study as well.One of
the measures undertaken to address the COVID-19 pandemic was the
lockdown for some time. The closure of the enterprises due to the
lockdown led to a financial impact. It affected the cash flows of these
units. In the early phases of the lockdown in March 2020, a FICCI report
mentioned that firms were struggling for finance. The reduced cash flows
due to the slowing economic activity had impacted all kinds of payments,
including wages/salaries, interest, loan repayments, and taxes. A joint
survey conducted by the non-banking financial company Magma Fincorp
and SPJIMR indicated that out of 14,444 MSMEs surveyed, nearly half
witnessed a 20-50 per cent impact on earnings.
Thus, the COVID-19 pandemic, and the lockdown in the initial phases,
had a financial impact on the MSMEs, affecting earnings, cash flows, and
their ability to pay wages and salaries. The other challenge was labour
availability. Most migrant labourers work in the MSME units. The
lockdown led to reverse migration, leading to disruption in labour
availability. The India Ratings Report anticipated that the underutilized
capacity and costs would increase for the MSMEs due to skilled labour
unavailability. In the initial phase, post the lifting of the lockdown
restriction, there was also a perception that many workers may not return.
The supply chain disruptions too affected the MSMEs. In a survey by
FICCI, 73 per cent of businesses reported reduced orders, and 60 per cent
reported supply chain disruptions. The supply chain disruptions led to the
closure of units. A report by IIT Madras revealed that nearly 78 per cent
of MSMEs in Tamil Nadu had temporarily shut down due to the COVID-
19 pandemic.Among these, 79 per cent were micro and small firms,
which were the worst hit. Around 68 per cent of the enterprises had only

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less than one month of cash flows to cover their operations, while the rest
had only enough to meet expenses for up to three months. The
pharmaceutical industry, which relies significantly on China for
procurement of Active Pharmaceutical Ingredient (API), for
manufacturing drugs was affected due to the lockdown in China. The
global supply-chain disruptions, export, and trade services were expected
to impact the trade. The Indian Institute of Foreign Trade (IIFT)
anticipated that most exports would be affected due to a slump in demand
and disruption of supply chains which are integrated across countries.31
It was expected to impact the MSME exports as the sector accounts for
over 40 per cent of India's total outbound shipments. The garment export
sector was expected to lose 2.5-3 million jobs due to order cancellations
and buyers not clearing dues.33The jewellery industry was affected due
to cancelled or postponed events such as shows, exhibitions, and
weddings. MSMEs in May 2020: tourism and hospitality, gems and
jewellery, power and utilities, textiles, and electronics were the hardest
hit sectors. According to a media report, though the lockdown was lifted
many months ago, the MSMEs continue to face challenges. A recent
report mentions that the MSMEs in Tamil Nadu continue to face
challenges due to supply constraints, leading to frequent price changes.
This restricts the ability of the MSMEs to plan, and has limited the
capacity utilization. For instance, the rising prices of steel, aluminium,
and other raw materials are putting pressure on the MSMEs' revival.
According to the MSME, contracts that were executed a year or six
months ago have become unviable due to rising prices. One of the
reasons for the rising prices is shortages that have occurred due to the
lockdown and low capacity utilization, subsequently. The government
rolled out multiple remedial Schemes to ease the pressure on the business

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units, beginning in May 2020. However, despite easing of credit from the
banking system, the MSMEs continued to face stretched liquidity cycles.
As per Brickwork Ratings, two key issues have intensified the cash
crunch for the MSMEs during the pandemic. These include a lack of
formal funding from the banking system and the delay in payments.
There has been a delay in payments to the MSMEs from the more
prominent companies and the government. According to the credit rating
agency, the payments held back were nearly 3.3 trillion rupees. This has
led to a cash-crunch despite the provision of services and supply of
materials by the MSMEs.
The Global Alliance for Mass Entrepreneurship (GAME), an industry
body for MSMEs, responding to the government stimulus and the
provision of bank loans, in June 2020, said that many small- and
medium-sized businesses faced difficulty as first-time borrowers. Many
were financially excluded from the formal banking system. Loans to
MSMEs are mostly given against property (as collateral), but property
values fall in times of crisis, inhibiting the extension of new loans. A
survey by IIT Madras in the early phases of the COVID-19 pandemic
found that over 31 per cent of MSMEs in Tamil Nadu depended on
moneylenders for their financial needs.

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Review of Literature

Bouey (2020) In the author’s research paper mentioned the stages of

Covid-19 epidemic on China and its impact. It also mentioned that
though the official estimates are not out yet but this pandemic has
affected China’s economy severely. The service sector losses during this
period are expected to cost china 1% cut in GDP for first Quarter. In
order to combat this Chinese government has switched its policies to
revive and restart economy.

Kumar, Thombare, & Kale (2020) In their research paper mentioned

that the impact of this pandemic on trade sector of India is around $350
Million and also according to Asian Development bank (ADB) , this
Covid-19 outbreak could cost India $29.9 Billion in personal
consumption Loss. The poultry industry is also hit by this pandemic amid
the rumours that Corona virus can spread through consumption of
chicken.

Kachroo (2020) Published a research paper on Novel Coronavirus

(Covid19) in India which gives an overview about the current scenario of
the lockdown and how is it being treated. It is mentioned about the
coronavirus spread in India and on how the country will learn from
China, Italy and other countries which are affected by coronavirus. In
India many things are done related to coronavirus. She also mention
about the quarantine and lockdown.

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Kurien, Bhat, Rao, & Kurapati (2020) Published their research paper
is on addressing the immediate challenges in controlling COVID-19
where it stays that the Government of India (GOI) has taken many
proactive steps to control the epidemic, including the total lockdown of
the nation to flatten the epidemic curve and reduce the case fatality rate.
India has chosen a strategy
of large-scale quarantine and limited testing and not extensive
testing and limited quarantine.

Mckibbin & Fernando (2020) In their research paper presented

some major estimates of cost of the Covid-19 virus outbreak. A
range of policy responses will be required both in short run and long
run. Central banks and treasuries will have to make sure that
disrupted economy continue to function while this disease outbreak
continues. Imposing lockdowns should be the priority. Quarantining
the Citizens will reduce the chances of spread of covid-19 virus.
Study shows that the spread of this virus in poor or under developed
countries is due to overcrowding, poor public health etc. which
should be taken control of.

Kakkar (2020) An article states that even after strong government

support is provided, the next 12 to 18 months will be bumpy
and it is anticipated that voluntary or involuntary consolidation
would take place from 20% to 30%. The crisis certainly remains
for companies that are able to conserve their cash and stay close to
their customers and staff. The reinvention will also be crucial

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for customers and hotels, airlines and destinations on one side to

become "fit for travel," for example.

Craven, Mysore, & Wilson (2020) In their research paper

mentioned that at the time of publishing the paper cases of covid-19.
were more than 380,000 with a hospitalization rate of 15% which
could drive hospital systems overloaded. Western countriesare
constituting the Early Chinese model to combat this pandemic
Covid-19 focused on immediate contamination and rapid medical
check-ups of the citizens. Impact of the virus across the different
sectors was also discussed in the paper.
Lalwani (2020) published an article on public action to minimize
the risk to SMEs. The Taxation and Other Laws (relaxed of
certain provisions) agreement was introduced on 31 March 2020 by
central government which sets out the extension of various
periods under the Taxation Act, the Income Tax Act (1961), the
Central Excise Act (1944), and the Customs Act (1962, etc.).

Pandey & Pillai (2020) In their research, the Covid-19 lock in India
is perhaps a major hit for micro, small and medium sized
enterprises (MSMEs). Their results are very high. Currently, 114
million people are working in the industry and 30 percent of the
gross domestic product (GDP) of India is contributed, not to mention
almost half of exports in this field are made of commodities
and services. 71 per cent of them were unable to pay their employees
' salaries in March in a recent survey of five thousand MSMEs

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conducted by AIMO. As per the MSME Ministry data, as of May

16, 2021, the Udyam Registration portal registered 30,00,822
MSMEs, which replaced the former process of filing for Udyog
Aadhaar Memorandum (UAM). The Indian MSMEs sector
contributes about 29% towards the GDP through its national and
international trade.

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Research Objectives-
following are the objectives of conducting this research work:

i. To study the contribution of MSMEs in the economic

development of India.

ii. To study the repercussions of nationwide lockdown and

Covid-19 pandemic on the MSME sector.

iii. To study the stock performance of MSMEs during the

Covid-19 pandemic in India.

iv. To study the counter measures including wage protection,

job retention, welfare entitlements, Employee Social Insurance
Scheme, Provident Fund coverage, and others) adopted by
government to minimise the economic loss of MSMEs due to
the Covid-19.

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Research Methodology
The research is completely on the basis of secondary data which
was collected from various published and unpublished sources.
The contribution of the MSMEs is studied and hence how the
downfall of the sector affects the whole economy. Data source is
mainly secondary data collected from public domains like
World Health Organisation (WHO) and Ministry of MSMEs and
various company reports, journals, articles and magazines. An
analysis was conducted on the stock prices of a sample of 20
enterprises which come under the MSMEs. The stock price data
was collected from the National Stock Exchange website where
the trading takes place. Other secondary data was collected from
Government and company reports, journals, articles and
magazines.
Observations were also extracted from existing economic
phenomena from economic news obtained from various
channels, media and newspapers. The stock price data collected
were analysed for a time period before the impact of coronavirus
and after the outbreak. The data was analysed based on various
parameters like annual return, annualised risk, utility and the
deviations of the shares of these enterprises. Data analysis
involved the usage of Microsoft Excel and SPSS software,
which is a statistical tool, was used to conduct t-test.
Data Analysis and Interpretation
The MSMEs in India are playing a crucial role by providing large
employment opportunities at comparatively lower capital cost than large
industries as well as through industrialization of rural & backward areas,

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inter alia, reducing regional imbalances, assuring more equitable

distribution of national income and wealth. As per the National Sample
Survey (NSS) 73rdround, conducted by National Sample Survey Office,
Ministry of Statistics & Programme Implementation during the period
2015-16, there were 633.88 lakh unincorporated nonagriculture MSMEs
in the country engaged in different economic activities (196.65 lakh in
Manufacturing, 0.03 lakh in Non-captive Electricity Generation and
Transmission1, 230.35
lakh in Trade and 206.85 lakh in Other Services) excluding those MSMEs
registered under (a)Sections 2m(i) and 2m(ii) of the Factories Act, 1948,
(b)Companies Act, 1956 and (c)construction activities falling under
Section F of National Industrial Classification (NIC) 2008. According to
the annual report of the Ministry of MSMEs, 31% of the MSME in the
manufacturing sector and 36% in the trading and 33% in the other
services are contributed, as shown in Figure 1.

Figure 1. Number of MSME'S

As per the Ministry report of the MSMEs, there is an estimated number of

enterprises of 324.88 lakhs enterprises as a whole in rural areas. Then
comes the urban areawith a total of 309 lakh. MSME in country engaged
in different economic activities. The share of manufacturing industry is
31%, share of trading activities is 36% and share of other services is 33%,
as described in Table 1.

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Table 1. Estimated Number of MSMEs (Activity Wise)

Activity Estimated Number of Enterprises (in Share%

Category lakh)
Rural Urban Total
Manufactur 114.14 82.50 196.65 31
ing
Electricity 0.03 0.01 0.03 0
Trade 108.71 121.64 230.35 36
Other 102.00 104.85 206.85 33
services
All 324.88 309.00 633.88 100
Source:Ministry of MSME Annual Report 2020-21

Micro sector with 630.52 lakh estimated enterprises accounts for

more than 99% of total estimated number of MSMEs. Small
sector with 3.31 lakh and Medium sector with 0.05 lakh
estimated MSMEs accounted for 0.52% and 0.01% of total
estimated MSMEs, respectively. Out of 633.88 estimated
number of MSMEs, 324.88 lakh MSMEs (51.25%) are in rural
area and 309 lakh MSMEs (48.75%) are in the urban areas.

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Figure 3 shows the distribution of enterprises in rural and urban

areas.
Table 2: Distribution of enterprises (Urban and Rural Area
wise)

Sector Micro Small Medium Total Share%

(1) (2) (3) (4) (5) (6)

Rural 324.09 0.78 0.01 324.88 51

Urban 306.43 2.53 0.04 309.00 49
All 630.52 3.31 0.05 633.88 100
Source: Ministry of MSME annual report 20-21

Figure 2:Percentage share of rural and urban MSMEs in the

country s

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Type of ownership of enterprises

Male/Female Ownership
Out of 633.88 MSMEs, there were 608.41 lakh (95.98%)
MSMEs were proprietary concerns. There was dominance of
male in ownership of proprietary MSMEs. Thus, for proprietary
MSMEs as a whole, male owned 79.63% of enterprises as
compared to 20.37% owned by female. There was no significant
deviation in this pattern in urban and rural areas, although the
dominance of male owned enterprises was slightly more
pronounced in urban areas compared to rural areas (81.58% as
compared to 77.76%)
Table 3: Percentage Distribution of Enterprises in rural and
urban areas. (Male/ Female ownership)

Sector Male Female All

Rural 77.76 22.24 100
Urban 81.58 18.42 100
All 79.63 20.37 100
Source : Ministry of MSME annual report 20-21

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Table 4: Percentage distribution of enterprises owned by

Male/ Female entrepreneurs (category wise).

Category Male Female All

Micro 79.56 20.44 100
Small 94.74 5.26 100
Medium 97.33 2.67 100
All 79.73 20.37 100
Source : Ministry of MSME annual report 20-21

Ownership of Enterprises Social Category Wise

The socially backward groups owned almost 66.27% of
MSMEs. Bulk of that was owned by OBCs (49.72%). The
representation of SC and ST owners in MSME sector was low at
12.45% and 4.10% respectively. In rural areas, almost 73.67%
of MSMEs were owned by socially backward groups, of which
51.59% belonged to the OBCs. In urban areas, almost 58.68%
belonged to the socially backward groups, of which 47.80%
belonged to the OBCs
Table 5: Percentage Distribution of enterprises by social
group of owner in

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rural and urban Areas

Sector SC ST OBC Others Not kn

Rural 15.37 6.70 51.59 25.62 0.7
Urban 9.45 1.43 47.80 40.46 0.7
All 12.45 4.10 49.72 32.95 0.7

Figure 3: Percentage Distribution of enterprises in Rural/

Urban areas (Social Category wise)

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Source : Ministry of MSME annual report 20-21

The analysis of enterprises owned by socially backward
groups in each of the three segments of MSME sector
reveals that micro sector had 66.42% of enterprises owned
by socially backward group, whereas small and medium
sectors had 36.80% and 24.94% of enterprises owned by
socially backward groups, respectively.

Employment
As per the National Sample Survey (NSS) 73rd round conducted
during the period 2015-16, MSME sector has been creating
11.10 crore jobs (360.41 lakh in Manufacturing, 0.07 lakh in
Non-captive Electricity Generation and Transmission, 387.18
lakh in Trade and 362.82 lakh in Other Services) in the rural and
the urban areas across the country. Statement No. 2.7 and Figure
2.5 shows the distribution of MSMEs activity wise.

Table 6: Estimated Employment in the MSME Sector

(Activity Wise)

Broad activity Employment (in lakh) Share%

category
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(1) (2) (3) (4) (5)

Manufacturing 186.56 173.86 360.41 32
Electricity 0.06 0.02 0.07 0
Trade 160.64 226.54 387.18 35
Other services 150.53 211.69 362.22 33
All 497.78 612.10 1109.89 100

Figure 4: Distribution of employment in the MSME sector

category wise

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Source : Ministry of MSME annual report 20-21

State wise distribution of

estimated MSMES
State of Uttar Pradesh had the largest number of estimated
MSMEs with a share of 14.20% of
MSMEs in the country. Top 10 States accounted for a share of
74.05% of the total estimated
number of MSMEs in the country. Statement No. 2.10 and
Figure 2.8 show the distribution
of estimated enterprises in top ten States
Table 7: State-wise Distribution of enterprises

Sl. No. State/ UT Estimated No. of MSME

Number (in lakh) Share (in%)
1. Uttar pradesh 89.99 14

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2. West Bengal 88.67 14

3. Tamil Nadu 49.48 8
4. Maharashtra 47.78 8
5. Karnataka 38.34 6
6. Bihar 34.46 5
7. Aandhra Pradesh 33.87 5
8. Gujrat 33.16 5
9. Rajasthan 26.87 4
10. Madhya Pradesh 26.74 4
11. Total of above 10 states 469.36 74
12. Other states/ UT 164.52 26
13. All 633.88 100
Figure 4: Distribution of MSME in top 10 States

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Registration of new MSMES

One of the critical indicators to assess the successful
development of MSME Sector in an economy is the data on
opening of new MSMEs; it depicts the conducive environment
for opening and growth of such units in an economy as well as
show the high morale of entrepreneurs in the macroeconomics
of the economy. Before the MSMED Act, 2006, there was a
system of registration by small scale industrial units to the DICs.
Subsequently, as per the provisions of the MSMED Act, 2006,
MSMEs used to file Entrepreneurs Memorandum (Part-I) at

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District Industries Centres (DICs) before starting an enterprise.

After commencement of production, the entrepreneur concerned
used to file Entrepreneurs Memorandum (PartII) /[EM-II]. A
total of 21,96,902 EM-II filings had taken place between 2007
and 2015. Analyses of information from EM-II filings is
provided at: http://www.dcmsme.gov.in /publications/EMII-
2014-15.pdf. Since September, 2015 to 30.06.2020 online filing
system under Udyog Aadhar Memorandum (UAM) based on
self-declared information was in place. Till 30.06.2020 total
MSME registration (UAM) was 10232451. Ministry has
replaced the erstwhile process of filing of Udyog Aadhaar
Memorandum, by ‘Udyam’ registration on a portal developed
by this Ministrybased on composite criteria of classification of
MSMEs, notified vide Notification dated 26.06.2020. Now the
existing and prospective entrepreneurs may file their ‘Udyam’
Registration online on portal: https://udyamregistration.gov.in.
An analysis of Udayam Registration provides a break-up of
Manufacturing and Services MSMEs. It may be noted that
MSMEs in Service Sector comprise a larger proportion of
Udayam Registration as compared to those MSMEs in
Manufacturing Sector. The break-up is
Figure 5: Share of Udayam Registrations- Manufacturing
and Services

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Pre and post Covid situation of

MSMES
MSMEs with a solid technological base, competitive mind-set
and a readiness to restructure themselves, which are innovative,
inventive and international in business outlook can take on the
challenges they face and successfully contribute 22 percent to
GDP.

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Country exports

The World Trade Organisation (WTO) has estimated that there

will be a steep decline in the Micro, small and medium
enterprises (MSME) exports by 13% to 32% in 2020 as the
countries are fighting the pandemic. The micro and small
exporters contributes to25% to the GDP of the country. The
sector also suffers due to the migration of the labours back to
their natives as they have nowhere to live.

Loss of labour

According to a study by the All India Manufacturers

Organisation (AIMO), there are 75 million MSMEs and around
25% of these enterprises will face closure. As per the forecast, if
the lockdown continues for a longer period, then 43% of the
enterprises will shut down. There will be a drastic fall in the
existing employment which is 114 million.

Break in supply chains

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According to the All India Motor Transport Congress, the daily

movement of the vehicles used for the logistics purposes of the
enterprises decreased to 10% of the regular levels. The Indian
Chamber of Commerce (ICC) has stated as estimated loss of Rs.
50,000 crores in the logistics of these enterprises.

Gross Domestic Product

The welfare of the country is affected rigorously as there is a

huge fall in the GDP of the economy. The MSMEs forms
around 25% of the Gross Domestic Product of the country. A
report published by the IANS states that a loss of $320 billion
has incurred on the economy by a 40-day lockdown.

Stock performance of MSMEs

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An analysis was made to study the performance of the stocks of

the MSMEs for a small period during the pre Covid-19 phase
and the post Covid-19 phase. A sample of 20 manufacturing
sector enterprises were taken from the whole MSME population
in order to study the performance of their stocks. The study was
done on various parameters like the annual return, daily risk,
standard deviation and utility of the equity of these enterprises.

“H0”: There is no change in the pre-Covid period and

during Covid period

“H1”: There is a change in the pre-Covid period and during

Covid period

Table 5 – Table showing change in Pre and Post Covid

period

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Inference: The above table shows that there has been changes
in the levels of each factor of the stock performance so that we
reject the null hypothesis and accept the alternate hypothesis
in all the cases.

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Table 6: Table showing difference in Mean and

Standard Deviation

Inference: The below table shows that there has been a decrease on
the average return, annualised return, daily risk, and utility of the
MSMEs whereas there shows an increase in the annualisedrisk and

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standard deviation of the MSMEs which is projected evidently through

the stocks.

Policy Measures to Revive the MSME

Sector-
The Confederation of Indian Industries (CII) took several
measures to fund MSME units in the country. CII announced
infusion of at least 25% of the working capital of the MSMEs,
which will increase the cash flow in the sector. In addition, it
also declared to support its MSME members (67% of its
members are from the MSME sector) in receiving bank loans at
the earliest and to assist in filing the GST of its MSME members
to allow the revival and survival of the MSME sector from the
impact of the lockdown, the central government announced a
much needed economic stimulus package on 13 May 2020. It
includes measures such as INR 3 lakh rore collateral-free
automatic loans, INR 20,000 crore subordinate debt, and
revision of the definition of MSMEs to boost the capital flow to

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the sectorGiven the weak fiscal position of India, the

government must assist enterprises in opening as soon as
possible in a phased manner. The formulation of supportive
policy must take into consideration the demand, supply and
labor shock and must be tailored to the unique challenges faced
by MSMEs. That said, the supportive policy framework could
consider following recommendations

● Wage support can be given to labor intensive MSME

units to incentivize them to retain their employees and to
avoid colossal number of layoffs by firms. The
government can offer to pay a part of wages to the
employees which will relieve the financially encumbered
MSMEs from huge liability. Additionally, such wage
support policy will also provide essential income support
to laborers in such extraordinary times. The salary/wages
of identified recipients could be directly transferred to their
Jan Dhan accounts.
● While addressing the liquidity crunch, the government
should encourage banks to increase share of lending to

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MSME sector with flat interest rates that would free up

their attention from liquidity shortfalls so that they could
focus on their core business. Additionally, they must be
offered deferment from payments like electricity bills,
water charges, property tax etc. Also, they must be
allowed to defer from loan payment without any penalty
until the demand of economy is somewhat restored and
payment cycle of economy is back on track. The worst hit
MSMEs involved in exports could be given a tax holiday
andmedium to long term loan with 4-6% interest rate.
● The government should reduce duties on imports to
safeguard MSMEs from their souring prices of imported
inputs. Also, the government of India should take
initiatives at international platforms like G20 to address
the global world trade slowdown though policy
coordination and collective action. India is struggling due
to the economic effects of the novel coronavirus and
therefore it is important to provide financial relief
packages for all the sectors that constitute to the GDP of

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the economy. The revival of the MSMEs is an integral part

in the development of the economy as a whole as a major
portion of the GDP comes from this sector. They provide
employment to a hugeportion of the economically weaker
section of the country. Due to the national lockdown, the
operations of the enterprises has come to halt and majority
of the organisations did not have any funds to pay their
employees. Looking into all the difficulties in the
situation, Government of India (GOI) has implemented
numerous measures to help minimise the loss of the
MSMEs. These measures were passed through the Finance
Minister of India, Nirmala Sitharaman.
● Credit and Finance for MSMEs

A mega package of Rs. 20 lakhs which is approximately 10%

of the total GDP of the economy is provided to the vast MSME
sector to stimulate the battered economy. This package has been
announced in order to boost the liquidity by opting government
schemes wherein enables to compete with foreign companies
and strengthen the networks.

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● Collateral-free loans

Up to 20 percent of the entire outstanding credit will be issued

to MSMEs by banks and non banking financial institutions.
Companies may take units of up to Rs. 25 crore non-recurring
credits and Rs. 100 crore turnover that can be taken on a four-
year tenor and a 3-month principal payment moratorium.

● Subordinate debt

MSMEs declared to be non-performing or those under stress

will be eligible for equity support as part of the provision of Rs.
20,000 crore for subordinated debt is provided by the
Government. The 4,000 crore CGTMSE Credit Guarantee
Funds Trust is also provided by the Government, which
provides banks with partial credit support for MSME lending.

● Equity infusion

The Government will infuse Rs. 50,000 in equity in small and

medium-sized enterprises through a variety of funding sources,
which will be operated through a parent fund and other

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subsidiary funds. The Fund of Funds, which is provided with a

Corpus of Rs. 10,000 crore, is intended to provide equity-based
financing to those small and medium-sized enterprises with
growth potential and viability which is listed on the Stock
Exchange.

● Clearing dues payment

The government and the public sector enterprises together will

release all pending MSME payments within a period of 45 days
from 13th May, 2020. The e-market for developing linkages for
MSMEs will be promoted to replace trade fairs and distribution.

● Global tenders disallowed

The government will not allow global tenders to MSMEs in any

schemes which is up to Rs. 200 crore. By doing this, the
government has instilled on being a great support to India’s
backbone by the measure taken.

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Revised MSMEs definition

The government has revised the definition of the MSMEs by

redefining a common matric that will be a mix of investment
in plants, machinery or equipment and turnover. This has
been done by the government to remove the difference
between the manufacturing and service oriented enterprises.

In such unprecedented times, the policy support should be well

targeted given the limited stimulus amount. However,
presently the government has no accurate data on MSMEs
relies on Fourth MSME census conducted in 2006-07. In
future before any long-term policy formulation, the
government should conduct the census of MSME now that the
government has changed the definition of MSMEs based on
investments level recently while declaring the second stimulus
package. An accurate data on MSMEs is perquisite for well-
defined policy formulation and well targeted policy
implementation to catalyze the recovery of backbone of the
economy.

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Discussion
The Micro, Small and Medium Enterprises (MSMEs) contribute
to a commendable portion of the Gross Domestic Product
(GDP) of the economy. The MSMEs contribute to 29.7% of
India’s GDP and 49.7% of the Indian exports and are the most
vulnerable sector as they are situated in both rural and urban
areas and where 51% lies in the rural areas. They provide
employment to around 55% of the population in the urban area.
There are more than 500 SMEs which are listed in NSE under
various categories like Nifty Midcap 50, Nifty Smallcap 250,
Nifty Midcap 400. Analysing the stock performances of various
manufacturing enterprises that come under MSMEs has shown a
decrease on the average return, annualised return, daily risk, and
utility of the MSMEs whereas there shows an increase in the
annualised risk and standard deviation of the MSMEs which is

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projected evidently through the stocks. The Government of

India (GOI) has taken various measures to combat with the
losses that the MSMEs has faced due to the lockdown amid the
Covid-19. Moratorium for 3 months is provided to the MSMEs
and various other provisions has been offered to these
enterprises with a longer tenor for the principal payments. Some
suggestions for recovering the scenario would be to reduce the
Cash Reserve Ratio (CRR) and providing an extended
moratorium payment period for the instalments of the term loans
which will be a relief to the enterprises. An extension of the
realisation and repatriation period on the export activities can be
established. Reducing the fixed rate reverse repo rate in order to
encourage banks to deploy surplus funds for investment and
loans to small and medium-sized enterprises.

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Conclusion
Despite being lethal to the Indian economy, the corona virus

apertures the opportunity for India to emerge as a Global

Manufacturing Hub while realizing its Make in India policy in

true sense. India can capitalize on the change in global outlook

of China’s manufacturing sector following the outbreak of

corona virus, and come to light as an alternative manufacturing

destination while gradually cutting leakages to China through

achieving self-sufficiency in manufacturing of inputs. India

should strive to achieve self-sufficiency in production of inputs

in the same fashion as India progressed to achieve self-

sufficiency in food grain production during the initial five-year

plans. This can be done through identifying the imported inputs

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and facilitating the establishment of MSME units of such

components. The growth prospects of MSMEs are high and they

have the capacity of propelling India out of recession provided

the government will have to nurture them just like a bird feeds a

baby bird as the economy limps back to normalcy. Eventually,

just like nurtured baby birds these MSMEs will spread their

wings and fly while driving the Indian economy towards new

height of growth rate. The Covid-19 is a virus which spread

worldwide that has affected millions of people and its outbreak

started from a small town in Wuhan, China. The novel

coronavirus has flattened the curve which simply means that

there is significant change in the shape of the graphs of the

interest rates and crashing down the stocks worldwide. Goldman

Sachs Group Inc. has predicted that the economy would not

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grow at all in the first quarter and later it would shrink at a 5%

annual pace. The pandemic has shut down almost all operations

throughout the globe. The status of this virus all over the world

is leaving behind a trail of destruction and thus most countries

are implementing different versions of lockdown and taking

measures to combat with the losses. All factories,

schools,colleges, offices and facilities of transportation are

closed in India, while critical services, such as supermarkets and

pharmacies, remain open. Among all the sectors affected by the

pandemic, MSMEs were severely affected as the most

vulnerable among the other sectors. They also contribute to a

major part of the Indian exports and has a significantly

contribution on the Gross Domestic Product (GDP). The

Ministry of Finance has taken requisite measures in order to

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combat with the losses that has taken place in the economy

through various provisions. The MSMEs being an important

part of the country, Government of India (GOI) has taken

number of revival actions to improve the conditions of the

enterprises. As per the recent measures, the manufacturing and

service sectors has been merged together with investment and

turnover being the criteria of classifying the small, medium and

micro enterprises. The MSMEs are offered moratorium and

lengthen tenor period to ease the difficulties which is faced by

them. The country will once again see a new and flourished

phase of the micro, small and medium enterprises.MSMEs have

been playing a key role in providing livelihood to millions of

Indians. The sector also offers a substantial gainful non-farm

employment in rural areas. However, due its nature of being

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unorganised and small size, the sector is highly prone to external

and internal crises. COVID-19 has created an uncertainty in

almost all segments of economic activities including the supply

of raw materials, demand for final goods, and even employment

opportunities. The data analysis and studies conducted by

individuals and institutions indicate that the sector has lost a

large number of jobs during the lockdown and even beyond

owing to the decline of output, revenue, and capital flow to the

sector. Many units particularly in the micro and small segments

of the sector were forced to extinct from the market due to

persistent loss of business. Therefore, financial support needs to

be urgently extended to this sector.The measures announced by

the central government for the MSME sector under the ‘Atma

Nirbhar Bharat Abhiyan’ have probably arrived at the right

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time and with a noble intention of reviving the sector and

making them ‘local to global’ under the umbrella policy

of ‘Make in India’. The Hon’ble Prime Minister has

emphasised on implementing structural reforms in land,

labour laws, and infrastructure in order to strengthen the

‘Make in India’ vision and help the country play a bigger

role in the global value chain. Many foreign companies

have shown interest in shift their manufacturing base out

of China, which in turn has created a golden chance for

India to grab the opportunities and make the country

truly a global manufacturing hub.

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