COVID-19 Pandemic's Socio-Economic Impact on SMEs

COVID-19 Pandemic's Socio-Economic Impact on SMEs

DOI: 10.4018/IJEGCC.313043
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Abstract

The COVID-19 pandemic global health crisis has also snowballed into social and economic crises. Globally, around 75 million confirmed cases were reported until December 2020, with about 1.6 million deaths. The pandemic resulted in lockdowns and brought economic activities to a standstill. This severely impacted all business organizations and more so the small and medium-sized enterprises (SMEs). SMEs' problems resulted due to lockdown, movement of migrant labor, paucity of funds, and lack of technology. Adopting an exploratory approach based on a systematic literature review of published directories, journals, and reports, the objective of this study is to deliberate on the social and economic impact of the COVID-19 pandemic on SMEs in general and India in particular. Thus, the focus is on exploring the upcoming trends, providing recommendations to deal with the issues, and sketching the future research areas in this particular domain. Findings reveal a reduction in active employment, distress of migrating employees, and a fall in income-generating sources.
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Introduction

Etymologically, the word pandemic derives from ‘pan’, which means all, and ‘demos’ which includes people. Medical experts used this term to refer to the phenomenon, which affects the whole population of the world (Vieira et al., 2020). According to a team of international developers, researchers, and volunteers of Worldometer the rapid spread of the coronavirus (COVID-19) in more than 220 countries and territories shook the world, leading to a severe and acute public health emergency from mid-2019. The word 'Corona virus' originated from the Latin word corona, which signifies either a crown or halo, which reveals the typical look indicating crown or solar corona beside the virus (Ali et al., 2020). The World Health Organization promulgated the news of the coronavirus outbreak as a global Public Health Emergency in early 2020 as official figures were available only after a several months delay. Since then, new cases of human-to-human transmission are reported frequently. The virus possesses an ability to mutate slowly, posing a threat to its treatment and control. The individuals infected were placed in isolation centers to curtail the circulation of the virus regardless of any recent travel history. Therefore, as compared to the previous epidemic shocks that were short and sharp the duration period of the current pandemic is less clear. The present transformation from public health pandemic to an economic crisis globally, provides a situation for analysis for entrepreneurs, employers, employees, and decision-makers of policies for identification of major trends during and posts COVID-19 (Syriopoulos et al., 2020). According to Organisation for Economic Co-operation and Development, the Small and Medium-sized Enterprises (SMEs) indicates a business that maintains revenue, asset, and the total number of employees below a certain threshold usually ten. SMEs constitute major industries in the area of construction, restaurants, hotels, and transportation. These are facing setbacks due to the loss of inactive customers and decreased business. Further, there is enough data and evidence to highlight that the social and economic effect and thereby the current crisis on SMEs is distinctively different from other kinds of downturns that happened previously (Baporikar, 2021b). The present crisis proves to be a huge impact on the service occupation such as Tourism, Hospitality, and Culture industries. Despite their importance, SMEs are excessively dependent on debt, especially bank loans for financial purposes which expose them to a major vulnerability (Gourinchas et al., 2020). Evidence indicates that discrimination based on race or gender persists which is deeply affecting their response to tackling the large-scale consequences (Baporikar, 2018). Major social inequities relate to discrimination based on race, which encompasses a wide influence on chronic stress. Since the considerable decline in demand and supply of manufactured goods affect financially fragile SMEs more than other enterprises, they face difficulty in operating their business, which is stagnating.

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