COVID-19: 78% MSMEs and startups in India reduced workforce in last 8 months, says survey

Seventy-eight percent MSMEs and startups in India have reduced workforce in the last 8 months since the COVID-19 pandemic broke out.

As per a survey by LocalCircles, only 22 per cent startups and MSMEs have the same or increased workforce as compared to the pre-COVID levels.

India's startups and MSMEs ecosystem went through a torrid time due to the COVID-19 pandemic and the following lockdown. With revenues and operations getting impacted for most businesses, many end up cutting costs and some even shut down temporarily or permanently. Per CMIE, 6 million Indians had already lost white collar jobs in the March - August period.

LocalCircles conducted a survey to understand the startup and MSME pulse on their workforce adjustments due to COVID. The survey received over 7,000 responses from startups, MSMEs and entrepreneurs spread across 104 top business districts of the country.

In the survey, startups and MSMEs were asked about how have workforce adjustments taken place in their business during the Covid-19 pandemic. In response, 25 per cent said their business has shut down and all workforce has been let go, while 15 per cent said their workforce has reduced by 50 percent or more.

A 19 per cent said their workforce has reduced by 25-50%, and another 19 per cent said their workforce has reduced by up to 25 per cent. A 6 percent said their workforce has increased and 16 per cent said they have same workforce as pre COVID-19 time.

This shows that 78 per cent MSMEs and startups in India have reduced workforce in the last 8 months since the Covid-19 pandemic broke out and only 22 per cent startups and MSMEs have the same or increased workforce as compared to the pre-COVID levels.

The Government also took steps to help these small businesses through the Atmanirbhar Bharat scheme, but its advantages per feedback from businesses in July this year have been quite limited, the survey said.

In 2017, the Indian Government passed the Maternity (Amendment) Bill that increased the right to paid maternity leave for working women from 3 months to 6 months - the third highest in the world. Although this was great news for nursing mothers, a ripple effect of this decision was noticed in many small businesses who reduced hiring of women in their organizations, purely due to financial reasons and the cost of funding maternity leave benefits. Though the Government came back and moved a proposal allowing companies to file reimbursement of 7 of the 26 weeks of maternity pay, there were few takers amongst small businesses.

Startups and MSMEs were asked about how employment of women has been in their business 8 months into the COVID-19 pandemic. In response, 7 per cent said women in their workforce have been reduced by 50-100 per cent, 12 percent said women in their workforce have reduced by 25-50 per cent, and 12 per cent said women in our workforce have been reduced by up to 25 per cent. 46 percent said they still have same number of women in the workforce as pre COVID-19. Not a single business reported increase in the number of women employees during the course of the 8 months of COVID-19 pandemic.

This means that 31 per cent MSMEs and startups in India have reduced women workforce in the last 8 months. The Labour Force Participation Rate (LFPR) among women in India, is one of the lowest in the world and appears to have slid even further during the COVID-19 pandemic.

In the final question, startups and MSMEs were asked looking at the next 6 months, how do they see employment of women in their business. In response, 50 percent said they don't plan to hire any women employees while 30 percent said they plan to hire 1-5 women employees. 13 percent said they plan to hire 6-10 women employees and 7 percent were unsure about it.

So while the last 8 months of the pandemic have been tough from the perspective of new employment of women with small businesses, the 6 month outlook does look a bit better. With growth coming back in many sectors, and given that Work from Home has become a new normal for many of the technology driven businesses and for white collar jobs, even in traditional businesses, it is likely to help more women find job opportunities in the coming months, the survey said.