35 millions numbers, almost 110 millions employments, 50 percent national export and driving force for GDP is the reality of Indian micro, small and medium enterprises. And what would be the state of such economy when almost 67 percent of units are lost with the outbreak of COVID? And, is there any option to replace such huge potential or need them more attention to bail them out of crisis? Let’s explore the Indian economic recovery after COVID.
Understanding importance of micro, small and medium enterprises
Needless to say that COVID outbreak is the only cause that ruined the most promising economic growth engine in India — micro, small and medium enterprises or businesses. According to economic times report, government admitted that almost 67 percent of micro, small and medium enterprises have been closed. Isn’t it shocking country like India?
Small scale industries have been a great choice in India even before the subjugation phase in providing employment, supply of goods and services, share in GDP and export. It is also true that these sectors are the most vulnerable for any unexpected shock due to inherited bottlenecks.
Undoubtedly, lack of documentation, credit accessibility, direct stimulus benifits, awareness are some of the issues needs to be addressed as quickly as possible to make them Growth engine of economic growth.
Present state of micro, small and medium enterprises
As per the official data of government reports, MSM’s contribute almost two-third in the employment generation with much lower capital investment. Besides, they have great share in GDP and export of the country.
As per statistics, 50 percent share in national export, 110 millions employments, 30 percent share in GDP, and huge manufacturing potential is the reality of Indian micro, small and medium sector. And, in coming days, the growth potential is no doubt beyond large caps.
At least in India where labour intensive industries always gain priority, I don’t think there is any potential alternative to help economy to grow.
According to international labour organization or ILO, across the world, micro, small and medium enterprises has two third share in employment generation. Hence, we can conclude that unless we empower such sector on time, it is too hard to imagine the economic recovery like V and U but L.
Understanding Indian economic recovery after COVID
Nifty is hovering around 18000, Sensex over 60,000 in January 2023, provide optimistic scenario but about what? Is it true representation of Indian economy or just bubble created by government relief and stimulus packages or skyrocketing inflation?
What is the share of nifty companies in employment generation in one and half billion population? Is it possible for 30 companies to offer bread and butter for 20 percent population of the earth.
Fortunately, it was the agricultural sector that somehow saved the Indian economy during COVID outbreak not Nifty 30. Otherwise, the dip of GDP would be more scary than what it was once.
Role and importance of micro, small and medium enterprises in Indian economic recovery after COVID
I have already provided the details regarding micro, small and medium enterprises. It is enough to prove why and how this sector is important in powering speedy economic recovery.
Inflation and unemployment or Stagflation
In reality, Indian economic recovery after COVID is something like K shaped as per the opinion of famous economists.
Actually, it is very uncommon to digest that handful companies have added almost double value in theirs market cap when people were fighting for meagre bread and butter.
Nifty and Sensex were trading almost half compare to today’s 52 week high. But, look at the job losses and payment increment. Most of the private sector workers are forced to take below payment than what was in pre COVID outbreak. The extra employment generation is a distant reality.
Hyperinflation, low salary and stagnation in employment generation
When the powerhouse of employment generation is shut down, is it possible to maintain the ongoing growth of employment generation, forget about growth?
Apparently, when the micro, small and medium enterprises are on the verge of death, is it possible to the country like India to get either V and U shaped economic recovery?
Comparative study of pre and post COVID outbreak
Here I’m going to provide the data to show the horrific nature of inflation. I’m going to compare the pre and post COVID economic situation.
Consumer goods and services
In pre COVID economic situation, as per the leading newspaper of India, the rate of consumer goods were like edible oil 80 rupees per kg, LPG 600 rupees per cylinder, atta price 25 rupees per kg, petrol 75 rupees per litre.
Now, let’s know the post COVID rates of consumer goods and services. Edible oil 150 rupees per kg, atta 40 to 50 per kg, LPG 1100 rupees per cylinder, petrol 110 rupees per litre.
Comparative study of GDP growth
Further, let’s see the market cap of Nifty 30 and Sensex companies. Nifty was around 10000 as per money control data. Now, it is around 18000. What does it mean? Companies got double market value than what they were even before COVID outbreak.
Finally, it is essential to take a look at the growth rate of GDP. As per The Hindu reports, In 2018, the GDP growth rate was 8.9 percent, in 2019, 4 percent, and in 2020 dipped -24 percent. After COVID pandemic, in 2022, it is 4.1 percent.
After studying pre and post COVID economic state, is it hard to conclude that the Indian economic recovery after COVID outbreak is uniform or with huge disparities? This is the reason why most of the economists stated that Indian economic recovery is K shaped instead V or U.
Last words on Indian economic recovery after COVID,
It is undeniable fact that COVID outbreak has been badly shattered the economies of the world. Most of the governments announced the relief and stimulus packages to bail out sectors in problem. But, not all responded in the same ways.
In India, especially large cap companies got most of the chunk government offered leaving majority micro, small and medium enterprises on the verge of death.
On the other hand, due to higher rate of money supply, there is Stagflation in system. Some economists termed such economic recovery as K shaped recovery.
We know that micro, small and medium enterprises have great potential in generating employment, GDP and in export compare to other sectors.
And, what happens when 67 percent of them are badly embroiled in financial crisis. After COVID pandemic, the loss of micro, small and medium enterprises created contradictory trend in recovery mode or path.
Hence, it is highly essential for government to provide cushion for these multipurpose enterprises to come out the ongoing difficult situation. Because, these companies have great abilities in dispersing economic growth to the last stakeholder.
Solved questions on Indian economic recovery after COVID
Take a look at the following solved questions on Indian economic recovery after COVID. These questions will help you to understand topic more easy way.
Principles of money supply and inflation