Indian economy and small businesses post covid 19
One of the countries that were terribly hit by the Covid 19 pandemic was India. India's economy ended up taking a staggering blow after the announcement of the nation - wide shutdown. The contraction in India's GDP was much worse than any of the world's largest economies. Although, well before the pandemic, India's GDP was on a downward slope, largely due to demonetisation, GST implementation, high levels of unemployment and financial sector stresses, the pandemic worsened India's economic condition.
According to CRISIL, small businesses in India are facing an existential dilemma because of the coronavirus-induced shutdown that could cause unprecedented challenges for them. In its report, the credit rating agency cautioned that the coronavirus epidemic would blow off a fifth of micro small and medium enterprise (MSME) revenues as the Indian economy shrank by 5% in the Financial year 2021 due to poor demand due to the COVID-19 pandemic and the resulting quarantine. The report also stated, “For MSMEs, the fall in revenue will be steeper at 17-21%, while EBITDA margin will shrink 200-300bps to 4-5% as weak demand gnaws away gains from lower commodity prices,".
The MSME industry is the pillar of our economy, producing more than 100 million people with jobs, contributing about 29% of India's GDP, which is projected to reach 50% by 2025. In addition to policy changes, digital transformation is the need of the hour to enable MSMEs to rebound from the economic recession caused by the Covid pandemic and unleash their abilities and help them grow by being more resilient, productive and robust.
Small Indian businesses have become highly resilient. Having survived the challenges post demonetisation and GST in the past, they are now confident of surviving the existential crisis following the Covid outbreak and lockdown. 73 percent of SMEs said they will withstand the current recession compared to an average of 60 percent of SMEs in Asia, according to a report by technology firm HP focused on the prospects of small and medium businesses for the post-Covid scenario.
The pandemic has created a great incentive for 64 percent of Indian respondents to reframe their market plan according to the latest standard, while 50 percent claim that the present situation gives them long-term possibilities. Nevertheless, the SMEs studied predominantly concluded on the necessity of embracing technology. While 35 percent presumed that digital adoption was essentially crucial to their growth, 40 percent thought it was very necessary. 17 percent and 9 percent thought it was relevant and important to their progress. According to a recent Cisco report, due to the digitalization of their projects, Indian SMEs will add $158 to $216 billion to the country's GDP in the next four years.