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MSMEs' Challenges in the Face of the COVID-19 Crisis - Veloce

COVID-19, commonly known as the Coronavirus, is the world's most recent outbreak. Individual countries have suffered greatly as a result of a single pandemic that has brought everything to a halt. 

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The MSME sector, in particular, is feeling the pinch.

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 Despite legislative concessions to decrease EMIs and make finance more accessible, the COVID-19 epidemic upheavals pose a dismal future for India's small and medium-sized companies.

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The coronavirus epidemic has shaken the world and its markets, as many underdeveloped nations grapple with the financial ramifications of this health calamity.

 The worst part is that nothing like this has ever happened before. As a result, no one has any preparations to cope with the upheaval and disaster.

 The global economy has fallen short of expectations, and forecasts indicate a further decline.

Small and medium-sized enterprises, which account for around 35% of GDP, are more likely to close as revenue requirements decline as a result of the pandemic lockdown.

 With the ongoing lockdown, it is projected that more than 40% of MSMEs would shut their doors.

Small-scale endeavors stymie over 90% of MSMEs, with limited job developments being a major challenge. 

The government's efforts to restructure MSMEs by incorporating larger financial turnover firms and MSME loan reforms fail to address the underlying issue of most unregistered, smaller-scale ventures failing due to a lack of operating capital and failing to meet business loan eligibility requirements.

This disease is a serious danger to the world economy. The Indian economy is now in a slump and expanding at one of the lowest rates in the last six years. Furthermore, the epidemic is producing a new set of financial problems that are pulling many sections of the economy apart. MSMEs are the most at risk.

Because this industry is predominantly reliant on China for all raw materials, China is critical to the flexibility of India's and its MSME sector's worldwide network.

 Various issues have arisen as a result of China's entire lockdown and India's partial lockdown, ranging from reduced fares to production pausing, labor inaccessibility, utilization vulnerability, and a market liquidity shortfall.

 If the lockdown lasts as long as projected, more than a quarter of India's 6.8 million core small and medium-sized firms (MSMEs) may be forced to shut down.

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A lengthy shutdown will have a substantial impact on small companies' goods and services, as well as their ability to get a business loan and take advantage of business loan interest rates.

 While it may diminish demand for their products, a disruption in the supply chain may cause all raw material costs to rise, forcing SMEs to lose money and be unable to get financing for their MSME.

 A total of 114 million MSMEs employ 114 million people, and a shortage of operational capital as a result of the closure would push the majority of enterprises out of the market. A blanket interest freeze would also stifle creativity and adaptation, forcing small businesses with limited resources to close their doors.

Major challenges for firms in obtaining MSME loans as a result of COVID-19:

  1. Regardless of whether bank contributions are accepted, the immediate problem for MSMEs will be to satisfy their legal obligations, pay their staff, and squeeze debt management. Lockdowns, disruptions in the flexible chain, and the effect of substantial company changes all increase the likelihood of wrongdoing in this area.
  2. They are ready for a major financial catastrophe as a result of a sharp drop in revenue and operational issues with little or no labor in the coming weeks when staff who have migrated from other locations return home.
  3. Seeking a protectionist strategy in business before an increase in local interest suggests a greater danger of the economy being locked in a low-interest cycle. Furthermore, continuous exemption from labor standards jeopardizes employees' incomes, impeding consumer demand restoration. According to the most recent shopper request risk map scan, laid-back workers in both rural and urban locations are most likely to cut down on their predicted consumption.
  4. Default rates on NBFC-obtained MSME loans may rise. The future does not seem positive, according to the CIBIL and CARE Ratings. Debt nonpayment is a risk for lenders that provide riskier loans to MSMEs, which often rely on rising income due to good returns and a high level of company turnover. This is a rare possibility due to the COVID issue.
  5. Recapitalizing finances depending on the company's profitability would be required to increase the capability of medium and small-scale organizations to operate during times of distress. Aside from financial planning, the necessary transformation in the corporate division will need action. While recent economic changes try to preserve the business sector, developing a medium-term strategy remains difficult due to the unstable structure.
  6. 43 percent of firms will shutter if the COVID-19-enforced closure lasts longer than the effective expiry date. The MSME sector is the backbone of the Indian economy and one of the key components that enable fast development. The industry, which employs over 114 million people and contributes to more than 30% of GDP, is at a crucial juncture that needs quick action.


Individuals with tenacity manage and connect with MSMEs. They are using the internet to discover the best way to service their consumers. They are changing as a result of how and when they collaborate, as well as their attempts to fulfill their family commitments. They will not be the ones to concede defeat. They're working hard and will soon see the light at the end of the tunnel.

The return of the COVID-19 epidemic has ground to a standstill in the global economy. Given the massive destruction caused by COVID-19, the authorities must implement stringent follow-up measures. It should offer details on immediate assistance efforts to rebuild credibility in this critical component, which has been undermined by the legislature's storm of interruptions.

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