Global Melt Down: Impact on Micro, Small & Medium Enterprises in India

Abstract

The Global economy is blessed with a curse in disguise or more commonly known as “Integration”. The economic turmoil that sprouted out of the developed economies had its spill-over effect causing a major setback to the industries of emerging economies and has eroded values both financially and economically. However, it may be noted that although the recessionary effect dented the demand of all business segments but major headwinds were seen in Micro, Small and Medium Enterprises (MSME). Global recession jolted the balance sheets of every industry and business segment, MSME’s, who are majorly into manufacturing of generic products got confronted with reduced demand and pricing pressure. The Government’s stimulus packages for generating demand and growth couldn’t suffice in insulating the MSME sector from the meltdown. MSME faces huge competition from its larger counterparts, who are having huge cash balance on their balance sheets, enjoys economies of scale, expertise in every field, use of high end technology, better product mix, fully integrated business operations and most of all accessibility to easy and cheap source of funding. MSME is considered as the core segment of every economy as it has to its credit of generating the highest rate of employment growth contributes a major share in industrial production and exports and most of all nurturing innovative entrepreneurial talent. Further, it ensures creation and growth of money supply in urban as well as rural areas, thereby improving the purchasing power and per-capital income of the people. Hence, proper measures should be taken to safeguard MSME’s from any financial sickness, adverse variations in operational activity and hostile takeovers on account of plunge in overall demand.