Understanding the Impact of Covid-19 on MSME sector

Covid-19 has not only disrupted the health of the country but also the socio and economic development in the country. Countless lives and livelihoods were lost. Due to Covid-19 pandemic & followed by a stringent extended lockdown, the MSME sector is badly affected.


MSME Act was launched in 2006 to become an integral part of the supply chain for products and

services; a creator of large-scale employment opportunities in rural India. Till May 2020, an enterprise with an investment of up to Rs. 25 Lakhs was called a micro-unit. A firm with an investment of Rs. 1

Crore was called a micro-unit, of Rs. 10 Crore was called a small unit, and an investment greater than Rs. 20 Crores was called a medium unit. The centre officially revised the definition of MSME units on 13th May 2020, which came into effect on 1st June 2020. As per the new definition, a firm with a turnover of Rs. 5 Crore is called a micro-unit. A firm with up to Rs. 50 Crore will be called a small unit and turnover greater than Rs.100 Crore is called a medium unit.

The classification is now based on Investment and Turnover (also called sales/Revenue)both :

  1. No separate classification of Manufacturing and services.
  2. MSMEs are those enterprises which belong to the above Investment and Turnover criteria and are present in Industrial sector activity and services sector activity. Agriculture activities are not considered under MSME.
  3. As per the revised guidelines, Retail and Wholesale trades will be included as MSMEs.

This sector provides employment largely to the semi-skilled and unskilled labourers, and builds output and exports in the country. It plays an important role in the GDP of the country through its huge

contribution. A total 30% of the GDP in the Indian economy is contributed by the MSME. Out of the total

exports, 48% is also from MSME. At the same time up till now MSME created 11 crore jobs. (IBEF, 2020)

MSMEs play an important role in the development of the country’s economic infrastructure by providing innovation, generating employment and by creating wealth. It contributes significantly in the economic

and social development of the country by fostering entrepreneurship and generating large employment opportunities at comparatively lower capital cost, next only to agriculture.

As per the National Sample Survey (NSS) 73rd round, conducted by National Sample Survey Office,

Ministry of Statistics & Programme Implementation during the period 2015-16, there were 633.88 lakh unincorporated non-agricultural MSMEs in the country engaged in different economic activities of which Manufacturing, Non-captive Electricity Generation, Trade, Other Services accounts for 196.65 lakh, 0.03 lakh, 230.35 lakh and 206.85 lakh respectively.

Over 6000 products ranging from traditional to high-tech items are being manufactured by the MSMEs in India. (TOI, 2020)

Following is the comparative distribution of MSMEs in the top 10 States accounting for a share of 74% of the total estimated number of MSMEs in the country. The state of Uttar Pradesh accounts for the highest number of est. MSMEs with 14% share in the country in 2021–22. The distribution of MSMEs in India

shows that just 10 states have ¾ of the total MSMEs in India and the rest states share 25% between them. Industrial powerhouse states; Maharashtra and Gujarat surprisingly account for lower number of MSME distribution per lakh of population.


MSME (Micro, Small and Medium Enterprises) is the backbone of the Indian economy because, MSMEs contribute approx. 8% of the country‟s GDP, around 45% of the manufacturing output and 40% of the country‟s exports3. Despite its importance and contribution in the economy, it is not flourishing at an expected rate due to the global pandemic. The pandemic disrupted the supply and demand chain resulting in lack of employment, financial instability, and business closures which badly affected low-income groups. Small businesses are facing huge challenges of cash-crunch and credit accessibility. MSME has been worst affected by the pandemic and still faces severe challenges. Amid the ongoing COVID-19 pandemic and devastating effect of the second wave, a total of 67% of MSMEs were temporarily closed for a three-month period during the financial year (FY) 2020-214 (KHAN, 2022) Est.

6.3 cr MSME in India5. Many enterprises still faced the same problems in 2021-22 due to inadequate measures and consideration by the policymakers in the previous union budget of 2021-22.

per cent are unsure of the future. The report states that the majority of startups might not be eligible for the INR 3 lakh crore emergency credit line for MSMEs approved by the cabinet, due to underlying terms and conditions.

During FY21, 67% of MSMEs who participated in a survey said they were temporarily shut — some for up to 3 months — due to the pandemic, MSME Minister Narayan Rane told the Lok Sabha in reply to a question on February 3. (KHAN, 2022)

Another survey conducted by Dun and Bradstreetfound that more than 82% of the businesses had a negative impact and 70% of them believe that it will take them almost a year to achieve the

pre-COVID-19 level of demand.

The MS survey conducted by MSMEs reveals that approximately 43% of the firms changed their business model to tackle the COVID induced crisis, and 35% of firms took external financial help to survive the pandemic.

Banks unable to provide essential credit

With over 95 percent of India’s businesses falling in the SME and MSME category, banks and lending agencies are finding it increasingly difficult to provide credit to this sector. (Prem, 2022)

Informal sector

India has a vast informal sector, the largest in the world, employing close to 90% of its working population and contributing more than 45% to its overall GDP. This sector was hit by two consecutive

shocks in a short span of time, from 2016 to 2019. The first shock was Demonetisation in November 2016 when 86% of the money in the economy became unusable overnight owing to a government decree, followed by the haphazard introduction of the Goods and Services tax in 2017 and a crisis in the

Non-Banking Financial Companies (NBFC) in 2018, is estimated to have left the sector in a vulnerable state before the onset of the COVID- crisis. 7

Lack of knowledge

According the Rathore and Khanna (2021)8smaller firms are less aware of relief measures and may be likelier to be left out of some of the relief measures proposed. The paper states that given the differential access to formal sources of finance, the move favours larger businesses over smaller ones.

Around 60% of surveyed businesses expect more measures and support including government interventions. Findings from the survey further reveal that three topmost challenges that might impede Small Businesses to scale up their businesses are Market Access (42%), Improving the Overall Productivity (37%) and Having Access to More Finance (34%).

Extension of Lockdown

As per the survey conducted by AIMO (All India Manufacturers Organisation) in June 2020, 35% of MSMEs’ and 43% of the self-employed people expressed that it was difficult for them to recover their business back to its original position, and they have decided to shut down their business operations. Their earnings were impacted by 20%-50% more than before during this COVID-19 lockdown. As a consequence of this, MSME owners suffered  from fixed costs  during the shut  down period and

employees suffered from fixed EMIs. According to the survey9 conducted of 5,000 MSMEs by All India Manufacturers Organisation, The Hindu, it states that 71% of firms are not able to pay salaries to their employees. At present, in India around 25% of firms will face closing if the lockdown goes ahead of 4 weeks, while 43% will face closing if lockdown extends further than 8 weeks. Unfortunately due to the extension of the lockdown the situation has been worsening.

In the paper by Tripathy & Bisoyi, 2021, a survey was conducted by the All India Manufacturers

Organisationon MSMEs 35% of MSME sectors have no chance of recovery as they have initiated shutting down procedures. The sector is struggling to proceed payments to workers, payments for fixed cost variables; such as electricity, rent, interest.etc. Overall, 70% of firms report that they will not survive the crisis beyond the next 3 months if the lockdown continues, and the smallest one might collapse in 1 month (Ghosh, 2020; Rathore, 2020; WTO, 2020).

The COVID-19 has an unnatural effect on the communities, businesses, organisations, financial markets and the international market as a whole. In this situation, the uncoordinated government lockdowns have led to a supply chain problem (Sipahi, 2020). That means lower labour and it means lower production, lower production leads to lower supply that will create the inflation situation in the whole economy. The

central govt. hasn’t provided sufficient relief packages to revive the disrupted MSMEs (Raney, 2020). The government has to make sure to reach every stakeholder in the MSME sector by providing sufficient mechanisms. (Ghosh, 2020) It is identified that most of the policies announced by the govt. hasn’t satiated the needs of the MSME units, hence more comprehensive policy measures are needed to restructure the backbone (Reddy et al., 2020).






ECLGS Extension

  • Emergency Credit Line Guarantee Scheme (ECLGS), being extended up to March 2023 from March 2022.
  • The current guaranteed cover has also been increased by Rs 50,000 crore to Rs 5 lakh crore, with the additional amount being earmarked

exclusively for the hospitality sector and related enterprises.



  • Finance minister also announced that the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with the required infusion of funds.
  • The move will facilitate additional credit of Rs 2 lakh crore for micro and small enterprises (MSEs) and expand employment opportunities.
  • The proposed CGTMSE revamp will help the micro sector that could not avail ECLGS earlier as micro units could not have existing credit outstanding. This was the basic requirement for availing ECLGS which has now been changed


RAMP Rollout

  • Raising and Accelerating MSME Performance (RAMP) initiative to be accelerated by the government with an outlay of Rs 6,000 crore over 5 years to help the MSME sector become more resilient, competitive and efficient.
  • The initiative aims at improving market access, access to credit, strengthening institutions and governance at the central and state level.


Interlinking of

Udyam, e-Shram, NCS, ASEEM

  • Linking of four portals vizUdyam, e-Shram, National Career Service (NCS), and

AtmaNirbhar Skilled Employee-Employer Mapping (ASEEM for seamless access to


government data on registration of MSMEs, unorganised workers, availability of skilled workforce, etc.

  • This initiative will widen the scope of the

above-mentioned portals and they will have live, organic databases, providing G2C, B2C and B2B services.

  • The services offered will relate to credit facilitation, skilling, and recruitment with an aim to further strengthen the economy and

augment entrepreneurial opportunities


Customs Duty

  • The Finance Minister extended the customs duty exemption given to steel scrap for another year.
  • In consideration to high prices of metal the government has revoked anti-dumping and

countervailing duty on stainless steel and coated steel flat products, bars of alloy steel and

high-speed steel

  • Customs duty on umbrellas raised to 20 per cent and exemption to umbrella parts has been



Surety Bonds in Public Procurements

  • Use of surety bonds as a substitute for bank guarantees will be made acceptable in government procurements.
  • This is expected to support MSME suppliers and work contractors who could now look at insurance firms for surety of their payments.


Concessional Corporate Tax

  • Extension of the concessional corporate tax rate of 15 per cent by one more year — till March 2024 for newly incorporated manufacturing


  • Through the 15% concessional corporate tax, the government is trying to attract more investments in the short run to support the Make in India initiative driven by the Production Linked incentive scheme or other government programs


PLI for Solar PV Module

  • Rs 19,500 crore to boost the manufacturing of solar PV modules under the production linked

incentive scheme. for manufacturing of

high-efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV modules, will be made.

  • This additional allocation is done with the view to potentially create 60 lakh new jobs and ~ 30 Lakh new jobs over the next 5 years


Other Initiatives

  • Defence spending – 25% of the spending to be made available to start-ups along with domestic manufactures
  • Drone Shakti scheme and INR 120 crores PLI scheme for drones and drone components to increase domestic manufacturing and create


  • Creation of an end-to-end platform to submit and manage e-bills for government contracts

with a commitment to pay 75% within 10 days for running bills, thereby helping to improve liquidity for SMEs providing services to government organisations

  • Launch of EoDB 2.0 to reduce compliance burden on MSME under initiative of “Minimum Government and Maximum Governance”


The budget highlights investment-led growth and push on capital expenditure to fuel economic revival, digitization and employment generation. The focus is on long term growth. Capital spending and capital expenditure is the key theme of the Budget. Therefore, the FM11 has increased the Capex investment target by 35% to 7.5 lac crore and announced critical investments and policies for infrastructure development via railways, metro systems, highways primarily through the PM Gati Shakti initiative.

Railway and Logistics linked stocks, Capital Goods, Cement, and Real Estate will gain with this.


Budget 2022-23 reflects firm commitment of the Government to boost economic growth by investing in infrastructure development. The government has been trying to promote manufacturing through better logistics as seen in the budget. There is an increased focus on ‘Skilling and providing employment in India’ in this budget. Start-ups will be promoted to facilitate ‘Drone Shakti’ through varied applications like Healthcare Drone Delivery, Air Taxis, Drone based on-demand delivery of parcels, Agriculture, Survey, Mapping etc. Initiatives like Desh stack e-portal and interlinking of Udyam, e-shram, NCS and Aseem portals will surely contribute to the Digital Infrastructure and entrepreneurial push. The government is working on creating an agro MSME category12 to push entrepreneurship in rural and tribal areas and help manufacturing via local and raw produce. The Budget announced the Production Linked Incentive Scheme that will create 60 lakh new jobs in the next 5 years. Although, PLI schemes are not

reforms. These are incentives driven investments, which will have only limited impact. ‘Atmanirbhar Bharat’ unveils the government’s push towards self-reliance.


The budget talks less about agri-driven, informal rural economy, and attempts at developing long term infrastructure. However, the infrastructure that is likely to be developed, might assist small vendors in developing roads or railways.


The overall allocation on the MSMEs has been increased by 26.71% to Rs 21,422 crore from Rs 15,699 crore in the last budget. However, the allocation for Khadi, Village and Coir Industries was reduced by 2.75% compared to the previous year’s revised estimates (Rs 1,232.32).The new allocation stood at Rs

1,168.03 crore. A significant number of MSMEs belong to labour-intensive domains, and had expected an increase in allocation of funds. In Technology Upgradation and Quality Certification, the total outlay has been slashed from last year’s Rs 330.31 to Rs 80.72 crore (down by 75.56%). Notably, the Credit Linked Capital Subsidy and Technology Scheme, which earlier had an allocation of Rs 315.31crore, has not

secured any amount this time. The Allocation for Interest subvention scheme also witnessed the whopping reduction of 99% and stood at only Rs 0.04 crore. (KHAN, 2022)


In the current budget, FM13 announced the allocation of Rs 6,000 crore for five years to make MSMEs more resilient, competitive and efficient. However, the specifications are missing, and this allocation might not be proved sufficient to achieve the target. Another step taken is the extension of the ECLGS (Emergency Credit Line Guarantee Scheme) till March 2023 and enhanced by Rs. 50,000 to Rs. 5 lakh crore is a welcome sign for the NBFC sector and over 130 lakh MSMEs through limiting the enhanced amount to only the highly stressed contact intensive hospitality and related sectors. This scheme would help the MSMEs borrow more from the market as the government provides a guarantee to the banks and NBFCs. Most of the schemes deal with the supply side of the sector. However, we need more

demand-side policy actions to fight the current crisis. In conclusion, no major reforms and policies are constructed for this sector, specifically micro industries, which have a huge employment generation share within the MSME sector. India could not achieve higher sustainable growth without focusing on the MSMEs.


The budget is said to be not focused on short term growth plans as it is CapEx driven. It lacks immediate requirements like, tax incentives, ease of doing business and investments in the form- failure to infuse funds into the market, absolute abandonment of unregistered MSMEs and schemes aimed at supporting new enterprises while failing to extend plans to revive the existing units are some of the issues that demand a more insightful plan. The MSMEs also hoped for GST rationalisation and some relaxation in the compliance burden. This would have helped in increasing the ease of doing business. (foxmandal, 2022) The budget is the continuation of the pieces from the previous budget. The government must go for expansionary fiscal policy (Keynesian demand management policy) financed by short-term monetisation.

Government introduced digital ruppe which would take a long process due to numerous design, use-case, targeted users, technology choice, model, medium of using digital currency etc. India is getting decent foreign direct investment (FDI), mostly in start-ups and services sectors. Still, the investment in manufacturing has been very low making the share of manufacturing in GDP stagnate. India is nowhere close to its manufacturing attaining 25% share in India’s GDP. Reforms in reducing the cost of doing businesses have not moved much on account of lack of progress.




In India the informal sector contributes around 40 to 45% to GDP (GUPTA & THAKUR, 2020). There are around 80% Informal Enterprises and 91% Informal Workers. (Nagaraj & Kapoor, 2022)


Unorganized/Informal workers are those workers who do not have any permanent job /who do not pay any tax / who do not receive any regular salary in their bank accounts or who are not registered under

EPFO scheme etc. There is no standard definition of unorganised/informal workers. As per International Labour Organization (ILO) informal workers are those without social security benefits. And as per ILO, informal enterprises are those which are not constituted as a separate Legal Entity (as Pvt. Ltd. or partnership firm or proprietorship firm etc.) and for which there is no information/account available.


Formalisation of the economy means bringing companies under the regulatory regime of government and subject to laws related to manufacturing and income tax. It includes firms providing some kind of social security to their employees and when they form a part of the tax net15. Formalisation of the sector helps gain social security to the workers and it is more productive than the informal sector.


So is the registration compulsory? No, but it is beneficial. It is better to register in the MSME/udyam portal as the government provides a lot of benefits in terms of loan facilities, easy access to credit, low interest rates, eligibility to many schemes, to the registered MSME enterprise.


MSMEs continue to face challenges of formalisation, access to knowledge services, access to timely and adequate finance, improving competitiveness, availability of skilled man-power, access to latest technology and marketing. The MSME sector is yet to benefit from the advances in digitization, which

can substantially reduce the cost and time for this sector.16 MSMEs under informal setup, lack access to formal credit as banks face challenges in credit risk assessment owing to lack of financial information, historical cash flow data, etc.it further restricts their opportunities to attract equity support and venture capital financing. Operating on a small scale and being informal in nature, they often do not maintain proper books of accounts and hence such MSMEs find it difficult to get classified as per the current definition.

In the post independence period, to protect employment, Govt. gave various fiscal benefits for small enterprises as these enterprises were mostly labour intensive and were present in rural and semi urban areas. Govt. also reserved various items which could be produced only by MSME firms and it regulated

bigger firms through various acts (one is MRTP Act 1969). So, due to socio-economic reasons, govt. had to give protection to small firms which resulted in an informal economy.


In the past few years the Govt. has taken several steps to formalise the economy and the labour force (like GST, demonetization, registration through various schemes like MUDRA etc.) but it’s a kind of forced formalisation which has also resulted in closure of various small enterprises. Informal enterprises are less productive and they lack capital, technology and best management practices. Hence, India requires a

structural transformation of converting these smaller unproductive units by providing capital, technology, better management practices so that they can increase productivity, become efficient enough to come under the tax net and convert into formal enterprises. India requires broad based reforms in education, health, governance, agriculture at the bottom level to properly move from an informal economy to a formal one.


As India has a greater number of informal MSMEs, they are less aware of the bank requirements which results in higher information asymmetries for eg. Data on Rbi lending schemes. Amid pandemic, the role of banks, NBFCs and FinTechs will be powering small businesses in the long run. Hence, adoption of innovative lending models will not only forge the right balance for financial stability but also encourage a focus on the credit needs of small businesses. There is a need to facilitate and support business ideas and shape them into enterprises as they play a major role in job creation and entrepreneurship and supply

chains. Due to lack of formalisation and low level of registration of MSMEs in Udyog Aadhaar Memorandum (UAM)17, utilisation of various schemes and credit support is constrained. Hence,

promoting formalisation and digitalisation amongst MSMEs and encouraging them to register in UAM has remained a challenge.


Amid covid-19, Minister of Labour and Employment Bhupender Yadav on 24 August, 2021 launched the

e-Shram portal and handed it over to the states/UTs for registration of unorganised workers across the country. The government aims to register 38 crore unorganised workers such as construction labourers, migrant workforce, street vendors, and domestic workers, among others. (ENS ECONOMIC BUREAU, 2021)


As per data18 from the MSME Ministry, as of November 26, 2021, the Udyam Registration portal registered 5,767,734 MSMEs, replacing the former process of filing for an Udyog Aadhaar Memorandum (UAM). Registered micro-enterprises stood at 5,441,220 (94.34%), followed by small enterprises at 293,555 (5.09%) and midsized enterprises at 32,959 (0.57%). As of November 26, 2021, under the top five state-wise Udyam registrations, Maharashtra recorded the maximum number of registrations with

12.18 lakh units, followed by Tamil Nadu (6.23), Gujarat (4.86), Rajasthan (4.68) and Uttar Pradesh (4.45). (IBEF, 2021)


For the first time in the history of India, a system is being made to register 38 crore unorganised workers. The workers will be issued an e-Shram card containing a 12 digit unique number [Universal Account

Number (UAN)], which will be valid throughout the country and going ahead, will help in including them in social security schemes. A worker can register on the portal using his/her Aadhaar card number and bank account details, apart from filling other necessary details like date of birth, home town, mobile number and social category.The registration of workers on the portal will be coordinated by the Labour

Ministry, state governments, trade unions and Common Service Centres (CSCs) and it is totally free for workers. It will not only register them but would also be helpful in delivering various social security

schemes, implemented by the Central and state governments anywhere anytime. Central Govt. has

sanctioned Rs 2.0 Lakh Accidental Insurance cover on death or permanent disability (and Rs 1.0 lakh on partial disability) to every registered unorganised worker on e-SHRAM Portal. The e-SHRAM Portal will help build a comprehensive National Database of Unorganised Workers (NDUW) in the country.

Though having an increased number of registrations, it has certain limitations. It does not provide details on social benefits provided to the migrant workers. Aadhaar-based mobile linkage is proving a hurdle for registration of many workers, and biometric authentication at CSCs is problematic. Moreover, the portal is no longer sharing the data on registered migrant workers. (IndiaSpend, 2021)



  • Enhancing digitalisation among neglected small businesses or retailers  / kiranas

The grocery sector accounts for half of India’s retail consumption, and kirana stores account for about 90 percent of the grocery retail market. Currently, there are over 12 million operational

kiranas across the country.20 Amid pandemic, even these were badly affected and many had to shut down.21 Hence, to prevent such vulnerabilities and enhance sales and business small retailers must digitise. In a 2020 survey, in midst of the lockdown, 40% of Kirana stores polled indicated a

willingness to partner with online delivery and supply platforms to help them keep the business running and growing. However, the Kirana store proprietors appear hesitant to adopt digital

solutions. A study found that due to lack of awareness, lack of skill and experience and being ignorant to the tool of e-marketing resulted in a hurdle in the adoption of digitalisation. Digital transformation is essential for the MSME sector. Hence, the government needs to accelerate and advance digitalisation among small businesses through government assistance programs. The government, regulators, and private players must work on scaling business online through

enhancing the use of social media and build trust in and increase the perceived usefulness and ease of use of digital technologies for conducting business. The Government of India should take various measures to improve Indian MSMEs and achieve the vision of Self-reliant India.

Alongside, digital service providers must improve their user interface, and make apps available in vernacular languages, which in turn will enhance the ease of use leading to the adoption of digitization by these businesses. There were 4 of the most popular combinations’ identified.

ASEAN, Google, and The Asia Foundation, for example, have partnered to support MSME digitization efforts using video and distance learning techniques in alignment with the ASEAN Action Agenda on Digitalization of ASEAN MSMEs. 22 Hence, under covid-19 measures; the government must introduce digital literacy campaigns, and consider ways to work with the private sector to promote the development of such materials.

  • More Women in the workforce

Only 17% of nearly 70 lakh MSME registrations on the new Udyam portal were of women-led micro, small and medium enterprises (MSMEs) in the country, according to the official data. (financialexpress, 2022) The highly notable reason for the low share of women in MSMEs are the challenges in accessing finance and psychological barriers. According to Boston Consulting

Group Analysis, Women who run their own business generate 10% more revenue than men do in five years. And yet, there are more men entrepreneurs than women entrepreneurs. A report by the World Bank says India can grow in double digits if more Women participate in the workforce. (firstpost, 2017) Due to uncertainty amid pandemic, female labour force participation rate in the country has fallen to 16% being tougher on women. They tend to hesitate to borrow and manage with the resources at their disposal. (Renu, 2022) As per the 73rd round of the National Sample Survey (2015–16), overall women make up 20% of the total MSME landscape and 99% of the

MSME enterprises are in the micro category. Within the MSME landscape, women make up 20% of the micro enterprises, and only 5% and less than 3% of small and medium enterprises respectively (Bargotra, 2021) Hence, essential reforms are needed for the women in the micro

enterprises. Neo banks have a real opportunity, here, to create access for women

micro-entrepreneurs, by reimagining products and services for women. The financial needs of

women micro-entrepreneurs must be understood, and catered to, specifically. (financial express, 2021) to accelerate technology adoption, innovation and digital skills training for women entrepreneurs. During the COVID-19 lockdown, the Mann Deshi Foundation introduced

low-interest smartphone loans, after consultations with its women partners, enabling over 80% of them to buy their own smartphones and transition to digital platforms for business (TOI, 2021) Banks should tie up with SHGs and microfinance institutions and should actively support and encourage by strengthening financial and fiscal assistance to women-led businesses. For instance, a Peruvian training program provided to clients of FINCA-Peru, a microfinance institution, taught general business skills such as how to calculate production costs and product pricing in addition to life skills such as separating business and home finances. The result—found through randomised control trials—was a positive, albeit small, impact of the Peruvian training program on female-led enterprise revenues. (Siba, 2019)

  • Upskilling labour

The skilled workforce transforms the economy from technology based production to an innovative and knowledge based economy. Hence, we see a lot of Chinese innovation in the MSME sector is attributed to skills development and training. The Chinese have realised the need for a skilled

workforce as the economy undergoes structural transformation. (hsu & et al, 2016) Since 2008, there have been a series of initiatives such as the National Skill Development Corporation, sector skill councils, Skill India, the National Council for Vocational Education and Training, the Pradhan Mantri Kaushal Vikas Yojana, etc. These initiatives have certainly moved the envelope, however, given the complexity of the existing problem, the outcome has been subpar. (kale &

girbane, 2021) The Indian Government has achieved its annual target in terms of training people in 2011-12 and 2013-14 (72 % in 2012-13, 72.43 % in 2014-15 and 23.64 % in 2016). (Ghatak,

2016) Although nearly 2.79 crore people were trained between 2012 and 2016, it alludes to a few operational leakage and systematic challenges which needs to be addressed. Few challenges at

Operational level in India are inadequate standardisation of content and certification, the poor quality of training, duplication of effort, inconsistent processes and weak data monitoring practices. The Indian government can take a cue from China by investing in manpower and revamping the skill strategy which will help revive the slump in manufacturing and service sector. For instance, 100 Days Online Skills Training Action – Launched on 8 April 2020 in China, aims to provide large-scale online free vocational skills training and help workers return to work. As of 15 May, over 9.3 million workers had registered online for training courses, of which 7.9 million had participated. (Liu, 2020) The government of India needs to look at the economy holistically and encourage and facilitate institutional strengthening, build capacity, foster innovation and enable and empower its citizens.


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Khushboo Mehta