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Impact of COVID-19 on Microenterprises in India
Research at a Glance
This study captures the financial and operational health of microenterprises across India during the COVID-19 crisis. Developed by the Global Alliance for Mass Entrepreneurship (GAME) and LEAD at Krea University, with support from the Centre for Digital Financial Inclusion (CDFI), the initiative aims to understand the pandemic’s impact on small businesses and their coping mechanisms. Drawing insights from a panel dataset of over 2,000 microbusinesses, the study tracks the evolving effects of COVID-19 through multiple survey cycles conducted between May 2020 and July 2021. It analyses trends in business performance, employment, cash flow, and resilience, while highlighting the adaptive strategies that enabled small enterprises to survive the crisis.
2000
MN+
+ microenterprises surveyed across Delhi, Haryana, Punjab, Uttar Pradesh, Gujarat, Maharashtra, and Tamil Nadu.
10
MN+
% of enterprises reported performing better than pre-pandemic levels despite gradual recovery in sales and profits.
Tracking the resilience and recovery of India’s microenterprises through the COVID-19 crisis.
The study, conducted with partners including AYE Finance, Pay1, and Mann Deshi Foundation, used a stratified, convenience sampling method to represent enterprises across manufacturing, services, and trade sectors. Data collection was conducted remotely through phone surveys translated into regional languages.
Key findings include:
- Financial performance: Sales and profits improved gradually over the study period, though only 10% of enterprises reported performing better than pre-pandemic levels. Despite 15% compound annual growth in sales, profits declined in the fifth survey cycle.
- Cash reserves and personal savings: Cash reserves depleted significantly, forcing entrepreneurs to rely on personal savings. By the fifth cycle, 75% of businesses lacked cash reserves, and over half had used personal savings to sustain operations.
- Employment: Layoffs increased as cash availability declined, particularly in the service sector. Manufacturing firms faced steady layoffs due to compliance costs but showed optimism in rehiring as demand improved.
- Operational challenges: Across all cycles, low customer footfall and declining sales remained the most reported issues. While supply chain disruptions were dominant early in the pandemic, by cycle five, cash flow and working capital constraints became the key challenge.
Stories from the field revealed entrepreneurial resilience, with business owners diversifying into new ventures such as mobile snack shops, mushroom cultivation, and home-based food enterprises to adapt to the changing market.
Who can benefit from this study?
Government Agencies and Policy Planners
Can use the findings to design targeted financial recovery schemes and strengthen digital and credit access for microenterprises.
Financial Institutions and Development Organisations
Can apply the insights to develop resilience-building products, capacity support, and digital credit solutions for small business owners.
