Abstract
This chapter attempts to study the COVID-19 pandemic's impact on business success and failure with an emphasis on small and medium-sized enterprises (SMEs). The other prime objective of the chapter is to discuss the various strategies that have been instigated by the government and other agencies to manage the adverse economic consequences caused by the pandemic situation. The theoretical investigation is done using secondary sources, which reveals that the SME sector has infused a strategic measure to bring back the situation to normalcy. However, there are still some more expectations from the SME sectors specifically from the government and other stakeholders to help them come out of this unforeseen situation.
TopBackground
The pandemic is initiating large-scale loss to life worldwide. It is a major health crisis which in turn has led to economic crisis, with pause in production, a collapse in consumption and confidence. At the time of writing the report, number of COVID-19 cases were at an increase worldwide and as well in India. However, the number of OECD (The Organization for Economic Co-operation and Development (OECD) countries the cases are shrinking, the lockdown and containment restrictions are step by step being lifted.
There are various ways the Covid-19 pandemic has affected the economy mainly the SMEs, mainly on demand and supply. In the supply side, business experience a decrease in the supply of labor due to migration, they either being unwell, looking after their children or other household activities due to absence of house help or the schools being closed and movement of people being restricted. There has been sever drop in capacity utilization due to implementation of lockdowns and quarantines adopted to contain the disease. Besides supply chains is interrupted leading to scarcities of raw materials, intermediate goods and parts.
In case of demand, a dramatic and unexpected loss of demand for goods and revenue for SMEs viciously distresses their capability to function, and/or causes severe liquidity shortages. Also, customers experience loss of income, terror of infection and heightened uncertainty, which in turn decreases the expenditure and consumption of consumers. This is due to employees being laid off and organizations not in a position to pay salaries. Sectors like transportation and tourism, are largely affected, leading to loss of business and customer confidence.
Normally, SMEs are known to have limited quantity of supplies, in certain cases this might shelter the SMEs from the shock. During the breakdown of the COVID-19 pandemic in China, this seemed the situation with German SMEs functioning mainly in regional supply chains and hence were less affected by changes in Asia and specifically in India. In some cases, SMEs will also rely on sellers from countries and regions with higher COVID-19 cases, increasing their vulnerability. Likewise, hindrances in shipping by air, road or sea disturb these SMEs. In the long run, it might be problematic for several SMEs to re-build contacts with former linkages, once supply chains are dislocated and former associates have established new associations and business contracts.
Key Terms in this Chapter
MSME: Micro, Small, and Medium Enterprises are involved in the manufacture or production, processing, or preservation of goods. A micro enterprise is where the Investment in Plant and Machinery or Equipment is not more than INR 1 crore and Annual Turnover; not more than INR 5 crore A small enterprise is an enterprise where the Investment in Plant and Machinery or Equipment is not more than INR 10 crore and Annual Turnover; not more than INR 50 crore A medium enterprise is an enterprise where the Investment in Plant and Machinery or Equipment is not more than INR 50 crore and Annual Turnover; not more than INR 250 crore.
Trade Receivables Discounting System (TReDs): The schemes for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate and other buyers, including Government Departments and Public Sector Undertakings, through multiple financiers
Aatmanisbhar Scheme: Atmanirbhar Bharat Abhiyaan or self-reliant India campaign is the vision of new India envisaged by the government to bring in changes in Economy, Infrastructure, System, Vibrant Demography and Demand of SMEs.
COVID Pandemic: The disease caused by transmission of severe acute respiratory syndrome. The source of the disease is identified from China.