Coronavirus lockdown: One in three MSMEs on the verge of winding up, says AIMO survey

Over one-third or 35% of the micro, small and medium enterprises (MSMEs) and 37% of independent businesses (self-employed individuals) are on the verge of shutting shop as they see no grounds for a recovery in view of the coronavirus outbreak, according to a survey by the All India Manufacturers' Organisation (AIMO).

The other 32% of the MSMEs said that recovery would take around 6 months, while only 12% expect it in three months.

The COVID-19-induced lockdown has impacted the economy and businesses with the MSME sector taking the hardest hit.

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The survey as cited by the Economic Times further said that the Centre's financial stimulus package has not reached the MSMEs and is also not enough to mitigate or offset the loss of business activity in the course of lockdown duration.

It added that the government's stimulus package doesn't apply to start-ups that account for around 11 per cent of the MSME sector in India.

 The AIMO survey stated that such a "mass destruction of business" was unprecedented.

"India has over 65 million MSMEs employing over 150 million people and over 130 million people are self-employed. This kind of mass destruction of business has not been witnessed since our Independence," KE Raghunathan, former President, AIMO said in a statement released on Monday.

The study was conducted in partnership with several industry bodies and associations comprising 46,525 responses from several industry segments including MSME owners, self-employed individuals, corporate CEOs, employees, and experts.

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It was carried out online between May 24 and May 30 and is the first of three parts that will be published by AMIO this week.

The survey report further stated that the 11% of respondents comprised of the undecided category in the MSME segment and about 17% fall in self-employed category.

"They still have scope to recover," the survey enunciated.

Meanwhile, corporate respondents indicated that "while business was affected it, 46 per cent felt it may take 3 months to recover while 26 per cent felt they will bounce back by the end of the year, a 6 months period," pointed out Kenny Ramanand, general secretary of AIMO.

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He added that "This sector will not see many closures but will see many people losing jobs, scaling down of operations, focus on core business and a fine financial balancing act."

Finance Minister Nirmala Sitharaman announced several measures last month to aid the MSME sector, comprising collateral-free loans of Rs 3 lakh crore and an equity infusion of Rs 50,000 crore in small businesses through a fund of funds.