The Bigger Fall: Covid-19 vs Global Financial Crisis (08-09) Impact on Indian MSMEs

Abstract

MSMEs are the core of economic growth and development in every country. They constitute a dominant player in the industrial landscape of most countries including India. The current study uses secondary data to assess the depth of impact of the two biggest crises of the 21st century – the Global Financial Crisis (2008-09) and the Covid-19 pandemic (2020-21). Secondary data reveals that Covid-19 has had a far stronger and deeper impact on Indian MSMEs relative to the GFC mainly due to the synchronicity of impact across the globe and across sectors due to the Covid-19 onslaught. While GFC was an exogenous shock to India limited to the financial sector, the Covid-19 had an exogenous trigger which imploded within. The twin demand and supply shock nature of the Covid-19 crisis exacerbated the woes of the real sector. The prevailing economic landscape at the time of Covid-19 was grim which reduced the shock absorption capability of the world economy in general and Indian economy in particular. Re-skilling MSMEs, periodic business monitoring using scenario analysis and conduct of stress tests are submissions made in this study to overcome the sitting duck syndrome in future. The study can be extended further to assess the longitudinal impact of the Covid-19 on Indian MSMEs.