MSMEs’ share in Indian GDP falls by 4% during FY21
India’s economy grew by 8.7 per cent in FY22 to Rs 147 lakh crores and, the real GDP growth for FY23 is foreseen to be at 7.5 per cent: SBI Research.
Bhoomika Singh August 1, 2022
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The Covid-19 pandemic is emerging as a slow poison to the global economy. Economies across the globe are dealing with the post-pandemic impacts in the forms of inflation, recession, and whatnot.
The same goes for India’s MSME (micros, small and medium enterprises) sector as, according to the data, Indian MSMEs‘ share in the total GDP had fallen from 30.50 per cent during the financial year 2018-19 and FY20 to 26.83 per cent during the first year of the Covid-19 pandemic, i.e., FY (fiscal year) 2020-21.
Whereas, back in FY18 the share of MSMEs in the GDP had grown from 29.25 per cent in FY17 to 29.69 per cent, according to the data.
The minister of state for MSMEs, Bhanu Pratap Singh Verma, informed the Lok Sabha in a written reply that the drop in FY21 assumed significance as the government has been looking to boost the MSME sector’s overall performance in the coming years.
Along with this, a Crisil report came out in June 2022, stated that around one-fourth of Indian MSMEs had lost their market share of more than 3 per cent due to the Covid-19 pandemic while half of them suffered a contraction in their earnings before interest, tax, depreciation, and amortisation (Ebitda) margins because of a sharp rise in commodity prices last fiscal, compared with the pre-pandemic FY20 levels.
However, there are a few measures that Verma informed about in Rajya Sabha, which are announced to help MSMEs in the country. These include:
- Subordinate Debt for stressed MSMEs
- Rs. 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for business, including MSMEs, which has subsequently been increased to Rs. 5 lakh crores
- Rs. 50,000 crore equity infusion through Self-Reliant India Fund
- Newly revised criteria for the classification of MSMEs
- New registration of MSMEs through ‘Udyam Registration’ for Ease of Doing Business
- No global tenders for procurement up to Rs. 200 crores.
However, India’s economy grew by 8.7 per cent in FY22 to Rs 147 lakh crore, only 1.5 per cent higher than the pre-Covid year of FY20. For FY23, the real GDP growth is foreseen to be at 7.5 per cent, according to research by SBI.
Not just the fall in GDP share, the government has also informed about the shutdown of almost 10,000 MSMEs during 2019-2022, due to the pandemic. According to information from the former Udyog Aadhaar and Udyam, Bhanu Pratap Singh Verma informed a legislator in the upper chamber of parliament that 9,667 MSMEs have closed since 2019.