Over a third of MSMEs begin to shut down following lockdown: AIMO

By

Isabelle Crossley

Published
Jun 2, 2020

Over a third of micro, small, and medium enterprises and self-employed individuals have begun to close down their businesses in India as they believe the financial toll of lockdown has left no possibility of recovery. 

 
Around 35% of MSMEs and 37% of self-employed individuals have begun to terminate their operations, according to a recent survey by the All India Manufacturers’ Organisation, accessed by ET Bureau. Despite the Union Government announcing various financial assistance measures for the sector, many MSMEs have not received adequate support to survive, according to the AIMO.
 
The manufacturers’ organisation has termed the situation unprecedented after collating 46,000 responses from industry bodies and associations across India. Around 32% of the survey group said that their business could recover in six months and 12% estimated they could recover in three months.  

“India has over 65 million MSMEs employing over 150 million people and over 130 million people are self-employed,” the AIMO’s past president KE Raghunathan said in a statement on June 1, ET Bureau reported. “This kind of mass destruction of business has not been witnessed since our independence.”
 
The Union Government has repeatedly said that MSMEs will drive India’s next wave of economic growth and has supported the sector through several of its campaigns including its ‘Make in India’ initiative. If MSMEs continue to close during extended lockdown, the effects on the sector will have a knock-on effect on the economy as a whole. 
 
The AIMO survey reported that the corporate sector, although still affected, is suffering less than the MSME sector. Around 46% of corporate respondents said their businesses will take around six months to recover from the current financial situation an 26% expected to recover by the end of the year.
 
However, although the corporate sector will not see as many businesses close down as the MSME sector, it is expected to see many employees loose their jobs. Some businesses reported being unaffected by lockdown but the majority of those businesses are in the essential sector, according to the AIMO.