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While the good news is that business sentiments are recovering across firm sizes there seems to be the emergence of a bimodal distribution of business sentiments in MSMEs versus large firms.

The dual impact of demonetisation and the inefficient implementation of the Goods and Services Tax (GST) had adversely affected firms especially the Micro Small and Medium Enterprises (MSMEs) in India. The pandemic has added to their woes. The NCAER Business Confidence Index (BCI) a measure of business sentiments which had fallen from 133.3 in the second quarter of 2016-17 (pre-demonetisation) to 111.2 in the third quarter of 2019-20 (pre-pandemic) fell to its lowest in the first quarter of 2020-21 recovering thereafter in the second and third quarters. But even after recovering business sentiments in the third quarter are lower than what they used to be a year ago.

We apply the latest definition of MSMEs — firms with an annual turnover less than or equal to Rs 100 crore — to the NCAER Business Expectations Survey (BES) data to understand the differences in business sentiments between the MSMEs and large firms (those with an annual turnover greater than Rs 100 crore).

The Business confidence index (N-BCI) of MSMEs was lower than that of large firms even prior to the pandemic (Figure 1). It started declining from the third quarter of 2019-20 falling to its lowest in the first quarter of 2020-21 recovering thereafter. The rate of recovery of the BCI is higher for large firms as compared to the MSMEs — a gap which widened further in the third quarter of the ongoing financial year.

The N-BCI is made up of four components that are shown in Table 1. Three key points emerge. First the percentage share of positive responses is higher for large firms as compared to MSMEs throughout the period — from the second quarter of 2019-20 to the third quarter of 2020-21. There is one exception. Ninety-three per cent of MSMEs had responded that their capacity utilisation was optimal in the third quarter of 2019-20 versus 88.6 per cent of large firms. Second the share of positive responses follow the overall trend — start falling from the fourth quarter of the last year reaching a trough in the first quarter of the current year and rising thereafter. Third barring the “present capacity utilisation is close to or above optimal level” component in all the remaining components we find that the share of positive responses in the MSME category is less than 30 per cent whereas it is higher than 40 per cent for large firms.

While the good news is that business sentiments are recovering across firm sizes there seems to be the emergence of a bimodal distribution of business sentiments in MSMEs versus large firms. Further large firms are recovering at a faster rate than MSMEs. This is clearly a worrisome sign and could have an adverse impact on the recovery of the industrial sector.

The Union Budget 2021 shows that the actual expenditure of the Ministry of MSMEs has come down from Rs 6697.6 crore in 2019-20 to Rs 5644.2 crore in 2020-21 (Revised Estimates) — a drop of 15 per cent. For 2021-22 the Union budget has allocated a sum of Rs 15699.7 crore (Budget Estimates) — a rise of 177 per cent. Out of that Rs 10000 crore or 64 per cent of the total is solely for the “Guarantee Emergency Credit Line (GECL) facility to eligible MSME borrowers” scheme.

The latest survey data shows that a third of MSMEs took credit over the last three months. However about 75 per cent of them were not aware of the Emergency Credit Line Guarantee Scheme in December 2020. During the survey and after it some firms asked reached out to us inquiring about the details of the scheme and how to utilise it. Forty-one per cent of the MSMEs faced challenges in accessing credit and out of that 40 per cent attributed it to lengthy paperwork. Even within MSMEs it is the smallest firms with an annual turnover of less than Rs 1 crore that face the most challenges.

There is a need to raise awareness about the Emergency Credit Scheme and improve its outreach to the smallest of MSMEs. Ease of doing business at the last mile needs to be strengthened by making paperwork shorter and simpler. For the next year or two a government helpline at the block/district level is needed to provide support to the MSMEs.

Access to credit is necessary but not a sufficient condition for the recovery of the MSME sector. A holistic policy based on the challenges identified in the UK Sinha report is needed to help the MSMEs overcome the once-in-a-century pandemic. This will have a positive impact on labour markets as well.

Bhandari is Senior Fellow Gupta and Urs are associate fellows and Sahu is senior research analyst NCAER. Views are personal

We use the quarterly NCAER Business Expectations Survey (N-BES) to understand the differential impact that the Coronavirus pandemic had on manufacturing versus services.  In the process we understand the challenges that the sectors faced along with their different coping strategies. Our data comes from surveys of nearly 600 firms conduced in June September and December 2020 across six cities with the ratio of manufacturing to services being 75:25. 

The impact of the pandemic was always going to be different on manufacturing and services.  Baldwin and di Mauro (2020) argued in “Economics in the Time of COVID-19” that while manufacturing would show a V-shaped recovery services would show a L-shaped one.  There would be some permanent loss in the contact-intensive services sub-sectors like aviation travel hospitality and entertainment and would take longer to recover. However the pandemic was expected to have lower negative impact and even in some positive impact on service sub-sectors like IT e-Commerce insurance  banking etc. which have the flexibility of moving to ‘working from home’ mode. 

Business sentiments had started showing a downward trend during pre-Coronavirus pandemic across both the sectors.    Sentiments in both the sectors hit rock-bottom in 2020-21:Q1 which coincided with nationwide lockdown and first phase of unlocking. The phase-wise unlocking of the economy has led to revival of business sentiments in the subsequent quarters albeit they remained weak compared to the same period in the previous year.  

Operational status during the pandemic related lockdowns and beyond

A larger share of service sector firms were operational in April and May 2020- 60.3% and 65.6% respectively.  The corresponding figures for manufacturing were less than 30% for both the months.  Services sectors remaining relatively less affected by the lockdown due to the fact that 42% of these firms were working from home only during this period in April and May 2020 respectively.  

After the first phase of unlocking started in June 2020 81.8% of service sector firms were operational. In contrast 91.6% of manufacturing firms were operational in June 2020. The difference was probably attributable to some of the service sub-sectors being not operational like transportation hospitality entertainment education etc.

The difference between the two sectors dissipated in July-September 2020 with approximately 93% firms being operational.  But there were substantial differences between modes of operation.  During this period 21.5% of service sector firms were working from home alone and another 53.2% were working from home & office. The corresponding shares for the manufacturing sector were 4.6% and 28.6% respectively.  

Labour Market during the last three months 

The following section discusses how the firms across sectors responded in their labour market decisions.   

Overall we find that the labour markets were comparatively weaker for the manufacturing sector versus services. However there were differences in sectoral responses across permanent & temporary workers. 11% of service sector firms responded they had increased hiring of permanent workers as opposed to 4% of manufacturing firms in June 2020 (Figure 2).  In September 2020 the corresponding numbers were 29% and 24% respectively. While the share of service sector firms reporting a rise in hiring of permanent workers during last three months fell to 21% in December 2020 the proportion stayed the same at 24%. 

For temporary workers we observe a contrasting trend. Between April and June 2020 20% of service sector firms responded that they had increased employment of temporary workers increased compared to 8% of manufacturing sector firms. This proportion increased from 41% in September 2020 to 46% in December 2020 for service sector firms. The corresponding numbers for the manufacturing sector were 33% and 35% respectively.

The contrasting trends across service and manufacturing firms for permanent and temporary workers indicate several important insights. First we observe that service sector firms are slower in hiring of permanent workers. As argued before this could possibly be due to a severe hit on contact-intensive service industries. However a faster uptick in hiring of temporary workers by service sector firms shows a change in labour market policies of service sector firms. Possibly due to the move to work-from-home service sector firms are possibly engaging in short-term employment contracts for workers. 

In sum business sentiments in the services sector were slightly better than manufacturing in the April-May period of the lockdown because the former continued to be operational as they could work from home.  The services sector outperformed the manufacturing sector in the temporary workers market. However in the permanent workers market after the initial setback in June 2020 the manufacturing sector outperformed the services sector.  

Given the large size of service sector in India such a shift in hiring and staffing policies of the service sector firms present a grim outlook for worker vulnerability since temporary work engagements usually have less social safety nets for workers. The lack of response of the Union Budget 2021-22 to these dynamics was surprising!

Bhandari is Senior Fellow Gupta and Urs are associate fellows and Sahu is senior research analyst NCAER. Views are personal

The COVID-19 pandemic has heightened awareness of the need for better data to inform response and recovery efforts leveraging the complementarity of public and private sources. Following the recent launch of the World Bank’s SDG Atlas this event convened partners to discuss how the World Bank can improve data literacy and call attention to the urgent need to address data gaps especially in the developing world as we work to get the Sustainable Development Goals back on track as part of a resilient recovery.  The Atlas of Sustainable Development Goals 2020 presents interactive storytelling and data visualizations about the 17 Sustainable Development Goals. It highlights trends for selected targets within each goal and introduces concepts about how some SDGs are measured. Where data was available it also highlights the emerging impact of the COVID-19 pandemic on the SDGs.

In this Live Event the World Bank introduced the SDG 2020 Atlas and discussed with data partners the role of data in leading a resilient recovery and achieving the Sustainable Development Goals highlighting how effective data communication can advance international development.

In his presentation at this event Dr Shekhar Shah Director General NCAER highlighted how challenging it will be to reach the 2030 Sustainable Goals due to the current crisis. He spoke on how data prepares us for the post-pandemic world.

A Recording of the Event can be viewed here

The beginning of the vaccination programme suggests that the end is in sight. How quickly we reach the goal post depends on how well prepared we are as we enter the race.

At the nation begins its recovery from the COVID-19 pandemic through a massive vaccine rollout the entire focus is on identifying the priority groups the logistics of vaccine distribution and whether the vaccine is a private or public good. The fact that people’s willingness to take vaccines might play a major role in ensuring that herd immunity is achieved for life to get back to normal is not fully acknowledged.

The Delhi-NCR Coronavirus Telephone Survey-round 4 (DCVTS-4) administered between December 23 2020 and January 4 2021 provides some evidence of vaccine hesitancy. The DCVTS-4 conducted by the NCAER National Data Innovation Centre resurveyed randomly selected households contacted in the earlier rounds of DCVTS from Delhi-NCR — this includes Delhi as well as rural and urban areas from selected districts of Haryana Rajasthan and Uttar Pradesh.

DCVTS-4 asked its respondents “In a few months if vaccines were to be available to prevent COVID will you be willing to take it?” The findings show that about 20 per cent respondents are certain about not taking the vaccine with significant rural (22.4 per cent) and urban (17.5 per cent) differences being observed. An additional 4 per cent mentioned that they will not take it as they were already infected. Another 15 per cent are unsure about taking the vaccine. Combining all these three categories one can argue that at this point vaccine hesitancy is quite high (39 per cent).

No significant association was observed between age gender of respondent and vaccine hesitancy. The less educated (0-4 years of education) are more hesitant to take the vaccines (52 per cent). Even after adjusting for education Muslims and Scheduled Caste respondents are significantly more likely to register hesitancy in getting vaccinated. Hesitancy among minority groups is also seen in other countries. A recent PEW poll in the US found that while 61 per cent of White respondents would definitely or probably get vaccinated only 42 per cent of Black respondents would. Improved trust in vaccine development and approval process as well as the overall trust in government health systems may play an important role in reducing vaccine hesitancy.

The development testing and approval of COVID-19 vaccines have been achieved within record time. On the one hand this is an unprecedented achievement but on the other it might lead to vaccine hesitancy due to concerns regarding compliance protocols and approval process.

Evidence of vaccine efficacy is the key in any vaccine approval process. Efficacy is defined as the percentage reduction in disease between participants who were vaccinated and those who received placebo in a randomised controlled trial set-up.

Efficacy data of the sister vaccines of Covishield came from four ongoing blinded randomised controlled trials done across the UK Brazil and South Africa which were published in the general medical journal The Lancet on December 8. Between April 23 and November 4 2020 roughly 24000 participants were enrolled for an evaluation of the safety immunogenicity and efficacy of this vaccine and data from more than 11000 participants was included in the interim efficacy analysis. The overall efficacy of the vaccine was found to be around 70 per cent which is above the WHO recommended threshold of 50 per cent. Approval of Covishield in India is based on these results as well as safety and immunogenicity data from the Covishield phase 2 clinical trial in India led by SII.

For Covaxin Bharat Biotech undertook a large phase 3 clinical trial involving roughly 26000 participants across 26 sites in India to assess its safety immunogenicity and efficacy. However no efficacy data from this trial was available for approving the vaccine as the phase 3 trial started only in mid-November. A phase 2 trial of Covaxin involving 380 participants found tolerable safety outcomes and enhanced immune responses. However the results from the phase 2 trial do not permit efficacy assessments.

The effect of any vaccine on the course of the COVID-19 pandemic is complex and there are many potential scenarios after mass vaccination starts. Clinical trials particularly those conducted within an expedited timeframe do not allow us to fully evaluate the ability of a vaccine to protect against severe disease and prevent death. Moreover side-effects in specific populations may only emerge once mass vaccination starts with a larger sample size under real-life conditions for all individuals without any exclusion criteria. Hence it is crucial that the Serum Institute and Bharat Biotech in collaboration with other research organisations continue doing post-marketing surveillance studies of vaccine effectiveness and monitor the side effects over a longer period.

Vaccine hesitancy cannot be addressed by pharmaceutical companies alone: Governments and health policymakers need to play a proactive role in promoting vaccination by educating the public and implementing policies that take care of health and financial risks associated with adverse events following vaccination. Health providers will need to be trained in responding to questions and identifying and treating potential side-effects. People will need to understand where and when to go for vaccination the doses and schedules what side-effects to expect and how to handle them and how to receive medical care for treatment of adverse events if any. Special outreach efforts may be needed for low-literacy populations and those who do not find it easy to trust medical systems.

The beginning of the vaccination programme suggests that the end is in sight. How quickly we reach the goal post depends on how well prepared we are as we enter the race.

This article first appeared in the print edition on January 28 2021 under the title ‘Between vaccine and victory’. Pramanik is senior fellow and deputy director NCAER National Data Innovation Centre Desai is professor and director NCAER NDIC. Views are personal.