As per the Annual Report of Department of MSMEs, there are 6.34 crore MSMEs in the country and around 51% of them are situated in rural India. The total employment provided is 11 crore but 55 per cent of employment.

It will not be wrong to mention that MSMEs has been the major economic engine over the last few years. It can be easily validated with the sheer number of employment generated by this sector at lesser capital investment and industrialization spread into the far-flung rural areas.

But these MSMEs had to face a various set of challenges such as the low budget for research & development, economic slowdown, raw materials cost increasing, tougher competition, etc. but still they have overcome these challenges and survived.

However, never in their wildest dream, they could have fathomed that they will be struck by the havoc created by the deadly COVID 19 coronavirus. This virus has resulted in the longest lockdown in India causing a major threat to the survival of the many small scale companies.

The major challenges faced by the MSME sector are:

  1. Liquid crunch – MSMEs facing with the major cash crunch as the economic activities have been stopped in this lockdown to control the spreading of the coronavirus. Though various schemes have been announced by the government to sail through the difficult times, however, it takes a long time for the fund to get reflected in the MSME accounts
  2. Raw Material Shortage –  MSME is facing the scarcity of the raw materials as they are dependent on the raw materials imported from the various countries and due to the coronavirus both the export and import of raw materials have been stalled creating widespread scarcity
  3. Shortage of Labour – The huge scarcity of labour has been created in the MSME sector as all the labours who work in the manufacturing sector have gone back to their hometown due to the rampant lockdown and as the government has provided daily wage facility through MNREGA scheme in their hometown there is a high possibility that the labourers will not come back to work for their old owners.
  4. The decrease in Demand –  As the lockdown is getting released slowly and the shops that were closed are opening for the limited period with utmost safety & security, but still the consumers are scared of stepping out of their home for shopping outside and have apprehensions that they might catch corona
  5. Escalating operating cost – the companies are unable to generate revenue but the operating cost is getting piled up due to delay in payment from the customers, employees salaries, low liquidity in the market
  6. Dependence on China for importing raw materials – MSMEs in India are majorly dependent upon China for importing raw materials and due to both COVID as well as current faceoff with China at Ladakh border, has worsened the situation even more. Trading has come to the standstill and many Chinese companies operating in India has been banned.
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To protect itself from the emerging challenges, MSMEs need to take some steps to stay relevant and sustain in the market

  1. Use Government Schemes – MSMEs should be up to date with various Government schemes that can help them to sail through the tough times. There are many MSME friendly Government schemes if well researched will benefit them immensely for their sustenance
  2. Retain good resource – Every effort need to be done to retain the key and trusted employees even if their services or the role is not sufficing the needs of the organization. This will instil confidence in employees about the organization ability to bounce back and will make them loyal towards the organization
  3. Technological Transformation – Technological advancement and upgrade helps the organization to streamline their business in a better manner and these organizations also get support from the government if they are integrating the business with innovative technologies
  4. China labelled as a Villain – India can take advantage of China’s position as a villain in the global market and can start an alliance with developing/developed countries to manufacture world-class products and change the status quo that China enjoyed before the pandemic
  5. Cost-effective marketing – MSMEs can use the budget for marketing & advertising as the rates have been slashed in the print, outdoor and television media. It is a good time to full-fledged indulgent in digital marketing as it is the most economical and best way to attract customers
  6. Retrospection – It is also time for the organization to retrospect about its strength and weakness. Every possible step needs to be taken to effectively manage the limited resources, marketing practices that get the maximum output and effectively cutting cost while keeping in mind the interest of every stakeholder.
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Only those MSME will emerge as true winners who can transform their way of doing business in a fast, precise and cost-effective manner and show credibility and trust of sufficing the needs of the consumer efficiently. They have to learn the hard way to handhold the customer, who are looking for the faster ways of getting the solution in these unprecedented times.