The COVID-19 pandemic reached the second stage in India and was soon expected to move into the third stage, where the virus would spread from clusters to communities. A developing country like India, where a major part of the GDP depends on MSMEs, was at risk of facing a deep economic crisis. During this tough time, MSMEs urgently needed financial help and government-backed schemes to continue operations and survive.
Understanding the situation, the Indian authorities introduced various schemes and announced relief packages targeted at MSMEs. Businesses, especially small and medium ones, were severely hit during the lockdown period. To address the financial crunch, relief packages worth ₹1 lakh crore from the Government and ₹50,000 crore from the Reserve Bank of India (RBI) were introduced. These packages were designed to help both lenders and borrowers, aiming to maintain liquidity flow within the economy and prevent business closures.
While it was believed that the pandemic crisis could ease within three to six months, experts warned that full economic recovery could take years. Satish Marathe, a veteran cooperative leader and RBI Central Board director, mentioned that this was an exceptional crisis and demanded exceptional responses. However, he also pointed out that these relief measures were short-term and might not achieve the desired impact, especially if lockdowns continued longer.
In India, most businesses rely more on bank credit than on their own capital, unlike in developed economies. Without a steady cash flow, many MSMEs faced the risk of shutting down permanently. Though the government promised more supportive measures, MSMEs needed immediate assistance in areas like working capital, loan repayments, and payment of wages.
Businesses made it clear that without solid financial backing, reopening after lockdown would not guarantee survival. The burden of fixed costs, lack of working capital, and dried-up customer demand added to the challenges.
To address the situation, various initiatives were quickly rolled out:
Nitin Gadkari and RBI together announced a relief package aimed specifically at solving the liquidity crisis. The government also promised to clear unpaid dues to MSMEs at both the central and state levels, which would inject ₹40,000 crore to ₹50,000 crore directly into the market.
Finance Minister Nirmala Sitharaman extended the deadline for filing Income Tax returns and GST returns to June 30. Penalties for late filings were waived, allowing businesses some breathing room to get their finances in order.
Major banks like the State Bank of India (SBI), the Small Industries Development Bank of India (SIDBI), and other public sector banks introduced special loan schemes for MSMEs. These included working capital loans, emergency credit lines, and restructuring options with relaxed norms.
The MSME Minister suggested allowing units located in COVID-19-free zones to restart operations early, helping businesses maintain continuity and reduce losses.
The government indicated that more financial and non-financial support measures were under discussion to ease the pain faced by small businesses.
During this crisis, Udyam Registration became a vital tool for MSMEs. Having a Udyam Registration Certificate served as official proof of being an MSME, making it easier for businesses to access the new benefits and schemes.
Why Udyam Registration Was So Important During COVID-19:
The pandemic period taught businesses a crucial lesson: formal recognition matters. MSMEs that were informally operating faced bigger hurdles when seeking help. On the other hand, Udyam-registered businesses had access to official support programs that could cushion the blow during the worst economic downturns.
The Old Definition of MSME classification based enterprises based on their “investment in plant and machinery/equipment” and “turnover”. Micro enterprises were defined as those with an investment not exceeding ₹1 crore and a turnover of up to ₹5 crore. Small enterprises had an investment cap of ₹10 crore with a turnover limit of ₹50 crore, while medium enterprises were classified based on an investment limit of ₹50 crore and a turnover cap of ₹250 crore.
The “Revised Definition” introduces significantly higher thresholds for both “investment” and “turnover” across all categories. Micro enterprises are now eligible with an investment of up to ₹2.5 crore and turnover of up to ₹10 crore. Small enterprises can have an investment of up to ₹25 crore and turnover up to ₹100 crore. For medium enterprises, the investment limit has been raised to ₹125 crore, with turnover allowed up to ₹500 crore. These revised limits provide greater flexibility and enable more enterprises to benefit from the MSME classification.
The COVID-19 pandemic was an unprecedented challenge for businesses worldwide, but MSMEs in India were among the hardest hit. Timely intervention through relief packages, tax relaxations, and banking support played a crucial role in helping many businesses survive. However, it was clear that MSMEs with Udyam Registration had a distinct advantage.
Udyam Registration acted as a bridge to financial support, easier loan access, and formal recognition, helping businesses stay afloat during difficult times. It continues to remain an essential step for any MSME that wants to build resilience, grow, and be prepared for any future challenges.
If you haven't registered yet, taking the step towards Udyam Registration could be one of the most important moves to secure the future of your business.
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Lokesh Rawat, From Madhya Pradesh
Recently applied MSME Certificate
