Do you know more than 60% percent Indian Startups Shut Down before the end of current financial year. This is all happening due to prolong corona virus in Indian. The Corona has effected almost each sector of our country but startups are more impacted this time. A survey revealed that more than half of startups and small companies in the country may close their shops by the end of this year. Or they may be forced sell, merge or change the existing line of business to survive.
According to a leading market research firm LocalCircle, 59% of Indian Startups Shut Down or sell themselves before FY. This list will not only include new startups but it will also add India’s small and medium (MSME) businesses. As per survey only 22% of startups and MSMEs will be able to run their shop for more than 3 months at present. 41% of businesses does not have money to even run organisation for another month. Apart from this, around 49% are startups and MSMEs are planning to reduce the workforce, cut employee salaries and benefits by July. This will further create job crisis in India.
What has changed for Startups since Covid19 started last year
Since the coronavirus started and lockdown announced in Mar 2020, most of Indian companies face the heat. Everyone forced to shut their business operation, production units and services for many months due to lockdown. Somehow IT companies and remote service industry survive due to work from home model. Millions of people lost their jobs and labours in MSME sector and production units forced to go home. The lockdown has reduced the demand and cash flow in the society. This has created fear for many as Indian Startups Shut Down. Because large population in India doesn’t not have money to buy things apart from essentials even today.
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Let me tell you that, Things were started improving since the unlock process started in India from June. Even market started responding from August and September-2020 and generated some demand. Many production units started working and offices started calling limited resource. Even e-commerce and local Shope started getting business in festive season. Everyone thought corona has gone and life will back to normal soon. But second wave of corona hit the Europe and Africa in early November with new variants. It has again crated fear for Indian Startups Shut Down because market and business started slowing after some cases with new variant reported in India. And now the peak of second wave has shattered all the hope of business in India.
How second wave of corona has created more panic for startups and MSME
The second wave of corona noticed by government agencies and business house in the beginning of February 2021. The cases started rising in urban India and huge numbers reported in in Mumbai and other parts of western region. The situation become worst while entering in March and become worst by April. Lakhs of daily cases in different pats of country created chaos in India. Thousand starts dying by each passing day due to lack of hospital bed, medicine and oxygen. Most of the state government forced to implement strict lockdown and forced people to remain in home. This has raised the question if Indian Startups Shut Down or survive.
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The second wave of Covid19 and fresh lockdown further killed the already struggling stratus and MSME. They were already in trouble due to decrease in demand and cash flow issue. They did not get any relief in fast phase of corona and second wave has worsen the situation. The great loan mela and moratorium has not helped the startups and MSME in first wave. High operating expenses, no income, loans and statutory liabilities has further kill them. The LocalCircle survey shows that 60% Startups Shut Down unless big relief offered by the government. Although there is very little hope left for them from government looking at last year relief package.
What can help startups and MSME to save their business: Indian Startups Shut Down
The government can help the startups in this tough time with little change in their existing policy. Startups want the government to approve the Corporate Social Responsibility (CSR) fund to be spent in startups working in social space. Let me tell you that, lot of startups are working in the health sector, emergency support, community and social engagement services. If center government will help those startups and fund them then they can survive. They need cash and policy support from government to survive. If government will no extend support then Indian Startups Shut Down for sure.
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The Startups and MSME in manufacturing sector wants government to help them in generating demand. They also want government to give cash support and cheap loan to reduce the production cost. This will help them to reduce the product cost for customers and this can generate demand. They also want government to pass some tax benefit and help in importing raw material fom countries like China to reduce the product cost. Startups believe that government will help them to sustain in this tough time. Although many differ to their view looking at their past support.
What RBI is doing to save the startups and MSME in India: Indian Startups Shut Down
The Reserve Bank of India (RBI) is also planning to conduct a survey of startups, MSME, Retail, Restaurants, Malls and Hospitality. They will try to identify the business impact on these sectors since Covid19 started in India. Reserve Bank has approved several banks to identify such businesses. They want local banks to meet with them and understand their requirements. They are planning to help them with all possible ways else Indian Startups Shut Down for sure.
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Let me tell you that it will not be an easy task to extend support to startups and MSMES this time. Each organisation has unique challenge to deal with corona impact. Many are facing cash crisis then some are facing resource or production issue. How RBI will help them in this tough time for survive, need to be seen. Last year moratorium and loan mela completely failed. Hope this will not repeated this time and real help extended to them.
