Assessing the Impact of COVID-19 on Small Businesses and Livelihoods in India: Challenges and Recovery Strategies

Abstract

The COVID-19 pandemic, which originated in Wuhan, China, in December 2019, rapidly spread across the globe, leading to unprecedented public health and economic crises. In India, the government implemented one of the strictest lockdowns in the world on March 25, 2020, to curb the spread of the virus. While the lockdown helped in controlling the initial surge in cases, it had severe repercussions on the country's economy, especially small-size businesses and the livelihoods of millions of informal workers. India’s micro, small, and medium enterprises (MSMEs), which form the backbone of the economy and employ over 111 million people, were hit hard by the restrictions, leading to massive disruptions in production, supply chains, and demand. This paper investigates the impact of the COVID-19 pandemic on small businesses and livelihoods in India, focusing on the sectors most affected, such as retail, hospitality, tourism, and manufacturing. The lockdown-induced disruptions led to significant revenue losses, with many businesses facing closure due to liquidity constraints and the inability to sustain operations. The livelihoods of millions of informal workers, who lacked social security and job protection, were jeopardized as businesses shut down or scaled back operations. The study also examines government interventions, such as the Atmanirbhar Bharat Abhiyan and Emergency Credit Line Guarantee Scheme (ECLGS), aimed at providing financial relief and reviving the small business sector. However, the effectiveness of these measures was hindered by implementation challenges, particularly for businesses in rural areas and those with limited digital access. The paper concludes by highlighting the need for long-term recovery strategies, including digital transformation, enhanced access to credit, and stronger social security for informal workers. These measures are essential to build resilience and ensure sustainable growth for small businesses in a post-pandemic world. This research contributes to the understanding of how crises impact small enterprises and offers policy recommendations for strengthening the sector against future disruptions.