The UN General assembly marks the importance of MSMEs by celebrating World Micro, Small, and Medium-sized Enterprises (MSME) Day annually on 27th June. As we approach the date for 2021, let’s take a moment to recognize how these enterprises contribute towards sustainable development in the world economy. 

What are MSMEs?

Businesses run on micro, small and medium scale are known as MSMEs. Production, processing, manufacturing, and preserving are the main functions of these businesses. MSMEs are considered to be a pillar of the Indian economy. They not only employ millions of people but also bring stability to the economy through exports.

The Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006 of India divided MSMEs into two sub-sectors. One of which comprises manufacturing enterprises and the other service enterprises. Under the revised classification of the MSMED Act of 2006, MSMEs are categorized based on their annual turnover and investment in plant/machinery/equipment and not on whether they belong to the manufacturing or service sector.

MSMEs, the pillar of the Indian Economy

In India, MSMEs are valued for accelerating economic growth and equitable development. These enterprises have lower capital costs compared to their large-scale competitors. They also give owners the chance of easy decision-making and management of their companies through limited resources. The MSME sector has the highest employment growth rate within India and is industrializing the rural and backward areas of the country. Marginalized sections of the society are empowered for socio-economic growth through this sector.

Make in India is an initiative taken by the Indian Government to create an environment for foreign capital investments. Its primary objective is to manufacture products and services in the country and open new sectors for these investments. 

So, naturally then, MSMEs are in the spotlight. The government encourages the creation of new enterprises and start-ups. The Ministry of Micro, Small, and Medium Enterprises envisions the growth of this sector through schemes and cooperation with other ministries, State Governments, etc.

Impact of Covid-19

When the pandemic shook the world and its economy, thousands of people became jobless, and businesses ran dry. The MSMEs sector was also significantly affected. 

India was hit by coronavirus at the beginning of the year 2020. By May 2020, Mumbai, Delhi, Ahmedabad, Chennai, and Thane accounted for the highest number of positive cases. An increasing number of businesses were completely shut down last year. Scarce consumers and earnings began to shake the MSME sector during the lockdown in 2020, and there was a reduction in the availability of resources. Laborers had also begun migrating back to their villages. 

When everything seemed hopeless, the Atmanirbhar Bharat Abhiyan relief package gave hope to the MSME owners. Financial aid of Rs. 20 lakh crore was provided to the MSME sector. This scheme included collateral-free business loans and equity infusions as well.

Come the year 2021; nothing could’ve prepared India for the calamity brought by the second wave of the coronavirus. In March 2021, this wave was more disastrous than its predecessor. It hit many parts of the country, and there was a spike in positive cases in Maharashtra, Uttar Pradesh, Chattisgarh, Karnataka, and NCR- Delhi. Maharashtra topped this list state-wise, and India now tops worldwide in the highest number of new and active cases.

The Indian economy and MSMEs were already unstable due to the backlog brought by the pandemic and the second wave wrecked the hard work of many of these enterprises in building back their businesses. Around 64.3 million MSMEs are struggling to keep their businesses afloat. According to a survey conducted by LocalCircles, 59% of start-ups and MSMEs will either reduce their scale of operations, sell away, or shut down in the coming months. Starting a new business in a pandemic is obviously hard.

How can MSMEs adapt to the pandemic?

With the adamant growth of digitalization in the past decade, some businesses wielded this route in stepping up their game. In India, however, not many were accustomed to digitizing their businesses. This unpreparedness created a stir in the MSME community during the pandemic.

Albeit, the second wave didn’t have a restricting lockdown compared to the first. It still isn’t enough to come out of the financial crunch and pressure the MSMEs are facing. The government approved manufacturing in many states. Construction is also permitted; however, lack of labor, resources, and capital has kept the work on hold. As a result, delivery cycles have been reduced. However, healthcare and essential product-based MSMEs are profiting through the pandemic. 

The current situation in India requires adaptability to save MSMEs. E-commerce is booming significantly, and it is changing the paradigm of businesses. The Cisco India SMB Digital Maturity Study 2020 states that digitalizing MSMEs could add 158-216 billion USD to India’s GDP. It could add to the recovery process of the Indian economy as well.

The RBI has announced incentives for MSMEs to face the pandemic. Banks are permitted to deduct credit that has been disbursed to newer MSME borrowers. They have also been told to reassess the working capital sanctioned limits, cycles, margins, and more provided to the owners. Along with tax waivers, micro, small and medium-scale businesses also require interest-free debt schemes. With their limited income, small business financial help will be crucial to making MSMEs stand on their feet again.


Since MSMEs are crucial for the socio-economic development of rural and backward communities, in a way, coronavirus has prompted the country to be ever ready in forming new business ideas and growth formulas. Scarce laborers available in urban areas have made these businesses find new ways and types of machinery to fill the gap. The country is now getting digitized in all aspects. Along with all the technical aspects needed to support MSMEs in rebuilding and sustaining, grit and determination of the enterprises are a silver lining in fighting through the pandemic.