Economic Impact of the COVID-19 Pandemic on MSMEs in India: A Review of Challenges and Recovery Strategies

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in the Indian economy by contributing significantly to employment generation, industrial output, exports, and inclusive economic development. The outbreak of the COVID-19 pandemic in 2020 created unprecedented challenges for businesses worldwide, with MSMEs being among the most severely affected sectors due to their limited financial resources and operational flexibility. This review paper examines the economic impact of the COVID-19 pandemic on MSMEs in India and evaluates the various challenges encountered during the crisis as well as the recovery strategies adopted in the post-pandemic period. The study is based on a review of secondary data obtained from academic journals, government reports, policy documents, and publications from national and international organizations. The findings reveal that the pandemic led to significant disruptions in business, supply chains, labor availability, and market demand, resulting in substantial revenue losses and financial distress among MSMEs. Many enterprises faced liquidity shortages, production interruptions, and difficulties in accessing credit, which threatened their sustainability and growth. The review further highlights the role of government initiatives such as the Atmanirbhar Bharat Abhiyan, Emergency Credit Line Guarantee Scheme (ECLGS), and various financial support measures in mitigating the adverse effects of the pandemic. While long-term recovery has largely depended on digital transformation, technological adoption, business innovation, and improved financial resilience. It concludes that strengthening institutional support, promoting digitalization, enhancing access to finance, and developing crisis-management frameworks are essential for improving the resilience and competitiveness of MSMEs in the face of future economic disruptions.