The proposed five per cent decline in GDP will have a serious impact on MSMEs

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Mumbai, Ta. 16 June 2020, Tuesday

Concerns have been raised that the impact of Kovid-12, which has seen a five per cent decline in the country's GDP in the current financial year, will have the most serious impact on micro, small and medium enterprises (MSMEs) in all segments.

Coronavirus is projected to reduce revenue for Indian companies by 15 per cent and EBDITA by 4 per cent. The crisis threatens to be a death knell for the country's small businesses, according to a Crisil report.

MSMEs' revenue is expected to fall by 15 to 21 per cent, while EBDita margins are expected to fall by 6 to 7 per cent to 7-8 per cent. The benefit of lower prices of commodities has been washed away due to weakness in demand. A sharp drop in operating levels will increase the liquidity stress of small units. Working capital conditions in particular will worsen.

Given that 3 per cent of MSMEs' total debt is owed to micro-units, they face serious challenges. Larger companies will meet the challenges of working capital but smaller companies will find it harder to cope, the report said.

The report also expects the incentives given by the Reserve Bank and the Finance Ministry to banks and other financial institutions to lend money to MSMEs to help ease the cash flow.

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