International organizations and MSME support: Covid-19 and beyond

Abstract

The year of 2020 was marked by the advent of the coronavirus (COVID-19) outbreak in China. Soon it spread all across the globe causing a global health emergency and was declared a pandemic by the WHO. Governments around the world reacted by sealing their borders and declaring a complete lockdown on all movements within their countries. All social, trading and economic activities came to a stand-still. As this lockdown continued from one month to the other, economic activity also declined leading to a global economic slowdown. This closure of all non-essential economic activities affected trade, investment, occupation and growth across all sectors. However the bearing it had on the smaller industries was far more than on others. Running on regular cash flows with minimal resources, the MSMEs (Micro, Small and Medium Enterprises) have been the most affected by the repercussions of this pandemic. MSMEs are the main source of economic growth and occupation for any economy and play an important role in promoting equitable development in developing economies. According to the World Bank1 , more than 90% of businesses around the world are represented by MSMEs. They employ more than 50% of the workforce. The formal contribution of MSMEs to national GDP in emerging economies is nearly 40% while the number goes up significantly if we include informal MSMEs. In emerging economies, 7 out of 10 jobs are generated in the formal MSME sector. This shows the importance of MSMEs in global economic activity and employment generation. Accordingly, the World Bank estimates that by 2030 the world would require around 600 million jobs in order to absorb the growing global workforce, making MSME development a high priority for most of the governments. Given the importance of MSMEs in overall growth and development, it is important to understand the challenges this segment faces in general and post this pandemic, and to examine steps that have been taken to address their problems. Further, in light of the employment and growth imperatives facing India and the introduction of the Atma Nirbhar Mission, it is even more important to take a closer look at the role MSMEs can play in this process. This study will outline the problems faced by MSMEs, both before and following the pandemic, with focus on India. It will first provide an overview of t Financing, Trade, Technology, Marketing, Infrastructure, Labour, Rehabilitation and Exit Policy issues which confront MSMEs. It will next examine the different approaches/ policies taken by developing countries, including India, to help MSMEs. It will also analyse frameworks created by various international organizations like the World Bank, ILO, ITC, and WTO and specific projects and initiatives to address MSME challenges. Measures and frameworks both pre and post COVID will be discussed. The main objective of this paper will be to learn from the practices adopted by various countries and from the frameworks and projects initiated by development agencies to identify ways in which India can better address the MSME segment’s constraints and challenges.