Coronavirus Disruptions to Hamper MSME Recovery Prospects, Challenging Operating Environment to Remain For the Rest of 2020, Predicts Moodys

Mumbai, September 18: Credit rating agency Moody’s Investors Service on Thursday said that coronavirus disruption will hamper the recovery prospects of India's micro, small and medium enterprises (MSMEs). According to an Economic Times report,

Moody's stated that economic and property market disruptions due to coronavirus will lead to higher delinquences by MSMEs. This will hit the companies' asset-backed securities (ABS) over the remainder of the year and hurt their chances of recovery.

The credit rating agency expects India’s economy to contract 11.5% percent in the fiscal year ending March 2021. The coronavirus induced lockdown has severely impacted the economy of several countries including India. There have been job losses, businesses have been shut and many SME businesses have also stalled. Moodys informed that demand for SME's goods and services has fallen along with job and income declines.

The report further states that the government of India's stimulus measures like guarantees on loans to MSMEs will partially help to alleviate liquidity pressures in the sector but it not help the sector to avert a downturn.

The rating agency further elaborated that they expect the challenging operating environment for SMEs to continue for the rest of 2020, which will also be increasing the risk of loan delinquencies.