Impact of COVID-19 on MSMEs

Micro, small, and medium enterprises contribute a third of India’s gross domestic product and provide employment to over 110 million workers. Using a mixed methods design to ascertain the level of sectoral distress at the peak of the nationwide lockdown in May 2020, we found production falling from an average of 75% of capacity to just 13%. On an average, firms retained only 44% of their workforce, and 69% of firms reported inability to survive longer than three months. Distress measures were more severe for smaller firms by employment size.

The authors thank David Neumark and Ashwini Deshpande for their valuable comments and feedback on this article. The authors are also grateful to the participants of the Applied Microeconomics workshop at the University of California, Irvine, for their suggestions.

Before the lockdown, my industrial area used to be full of people. Today, the only people you see here are the owners. Invoices I raised two months ago are still pending but raw material cost in this period is up by 10% and demand has reduced by 75%. I am, however, still paying monthly interest payments and (fixed) electricity charges. I don’t think my business will survive more than a month, if things continue like this.

— 27 May 2020, owner of a faucet producing enterprise in north-west Delhi