Impact of COVID-19 on Microenterprises in India

This study, conducted in collaboration with the Global Alliance for Mass Entrepreneurship, captures the impact of the COVID-19 pandemic on microenterprises in India through a multi-dimensional study.

Background

Covid-19 and the preventive measures implemented to tackle its spread, such as lockdowns in multiple countries, have affected the global economy. In India, microbusinesses form a crucial foundation for livelihoods and employment, and the lockdown has had a significant adverse impact on them. However, given the challenges in surveying the micro and small business segment, there is a lack of granular data on their economic activity and income. Moreover, little is known about their ability to weather shocks and cope with crises such as COVID-19. This study aims to understand the impact of the pandemic on microenterprises in India, focusing on business activity, employment and income. 

Approach

Given the logistical challenges in conducting fieldwork during the pandemic, the sample for this study was drawn from lists provided by organisations working with microenterprises. The stratified, convenience random sample of 1,461 microenterprises, was drawn to represent microenterprises from various sub-industries in manufacturing, services, and trade. The sample has been drawn from across North, South, and West India. A first-round telephonic survey was conducted between 29 May and 10 June. The bulk of the microenterprises are situated in tier-3 cities or rural areas.

Key Findings

The median age of businesses in the sample is 12 years, with a median of 2 employees. 67% of the enterprises employ 1-4 people, 24% employ 5-15 people, while the remaining 9% have more than 15 employees. Women-led enterprises comprise 19% of the microenterprises surveyed. Fixed establishment-type shops (wholesale or retail) comprise over 60% of the sample for both men and women-led microenterprises; while 27.2% of men-led enterprises are small manufacturing plants, and 30.5% of women-led enterprises are home-based businesses. Prior to the lockdown, the sluggish economy was already detrimental to these microenterprises, with 39% mentioning they were doing worse than expected in the pre-lockdown scenario, and only 24% doing better than expected. Preliminary findings present a complex scenario, highlighting distress and, at the same time, optimism and resilience among microenterprises, and differential impacts across sectors as well as gender. Further results are forthcoming. 

Implications

By tracking enterprises in the sample over a period of six-months, this dynamic panel study provides critical data on the current state of microbusinesses across India. The study findings can inform relevant policy and industry decisions regarding relief and recovery programmes to support these businesses. Granular insights on microenterprises and their challenges are already very scarce, making it even more crucial to understand their ability to weather shocks and adapt, and the mechanisms by which this occurs. 

Thematic area

MSME & Entrepreneurship

Project Leads

Sharon Buteau, Preethi Rao

Partners

GAME India, Mann Deshi Foundation, Pay1, Aye Finance

Status

Completed