Five years of Covid: Struggles, adaptations and hope for small businesses

From closures to online pivots, how small enterprises weathered the pandemic storm

Chand, 39, and his friend Ajay are among the thousands of labourers gathered at Manesar’s Labour Chowk, hoping to secure a day’s work. Despite the adversity they face, the two friends share a hearty laugh about their situation. Hailing from Dhorra Mafi (Uttar Pradesh), considered to be the most literate village in Asia, their journey to New Delhi was not one they had anticipated.

 

"We used to run a small business dyeing jeans," Chand says. "The first wave of the pandemic and the lockdown shut us down.” They tried borrowing money to restart the business, “but with everything so uncertain, no one wanted to give us a loan. So, here we are, looking for daily work".

 

Their story mirrors the struggles of many small business owners across India who have been deeply affected by the pandemic. 

 

Five years since the first Covid patient was detected in India on January 30, 2020, several small businesses are still struggling to get back on their feet. While some have managed to navigate these difficult times and recover, others like Chand and Ajay (they give only their first names) have been pushed to the brink.

 

In Mumbai, Manohar Wagle, the owner of Wagle Sports, one of India’s oldest sports shops, reflects on his experience: "This shop was established by my great-grandfather in 1865. I'm the fourth generation to run it.” He says his ancestors faced challenges like the two World Wars, the Independence struggle, and wars with China and Pakistan. “The pandemic was probably my biggest test.”

 

Ripple effect

 

Even before the pandemic, small businesses were coping with the effects of the goods and services tax (GST) and demonetisation. For some, the pandemic and the subsequent lockdown proved to be the final blow. Others barely scraped through.

 

"Before the pandemic, we had a steady flow of customers, especially industrial workers who came to us because we dyed pants at a reasonable price," Chand says. "We weren’t doing great, but we managed.” They had taken loans the previous year and were paying them back. “We didn't even know about the first Covid case, but by June, things got so bad that we had to dip into our savings just to pay rent."

 

A similar trend played out across the country. From January to December 2020, 12.7 million people partially withdrew funds from the Employee Provident Fund accounts as compared to 5.4 million in 2019, shows data from the Employees' Provident Fund Organisation.

 

For Wagle, recovery has been slow. "Business hasn't bounced back fully. We had to close our shop in Khar Gymkhana, and overall business is down by 40 per cent compared to pre-pandemic times."

 

One of the main challenges that small businesses faced was unsold inventory. With sales plummeting, shops were left with piles of products they couldn't move, leading to significant losses. "After the second wave, our inventory built up as sales dipped,” says Alok Ubgade who runs a pharmacy in Nagpur (Maharashtra). “Some of our stock expired, and we suffered losses because of that. Now, things are more stable, and we're back to pre-Covid levels."

 

For Wagle, ordering stock has become more of a calculated risk. "We used to keep large inventories because our manufacturers are in North India, and it made sense to buy in bulk,” he says. “But now, with manufacturers cutting down on credit, we have to pay in advance. The whole supply chain has changed."

 

Another hurdle small businesses faced was rent. Rajesh Agrawal, who runs Prince Opticals in Patna (Bihar), explains, "Sales have almost halved since the pandemic, but we still had to pay rent and staff salaries on time. There were no concessions. It was hard to manage when there were no sales, and we received no help from the government."

 

For Prashant Kothari, a proprietor at Chennai-based PK Quimicaa, it was a matter of quality over quantity. “We had to carefully choose suppliers who could offer prompt payments. The raw material cost also increased.” Keeping prices affordable for customers without squeezing margins was tough, he adds.

 

The pandemic's scale of devastation is apparent in data from the Annual Survey of Unincorporated Sector Enterprises. During the second lockdown in April-July 2021, the number of unincorporated enterprises fell to 5.03 million. While they reached 65 million in 2022-23, that was barely an improvement from 63.3 million in 2015-16. In 2023-24, the number went up to 73.4 million.

 

Adapting to the new normal

 

With strict lockdowns and social distancing norms, small businesses had to pivot quickly to survive. Technology became a lifeline, and many turned to online payments and home deliveries to keep going.

 

Agrawal says the retail landscape has changed drastically since Covid. "Retail business is down, but online sales have picked up." Customers, he adds, prefer the convenience of home deliveries and the wider range of options available online. “Most of our transactions are now digital, with only 10 per cent of customers paying in cash."

 

Wagle echoes the sentiment. "We get orders over the phone and WhatsApp now. Most people don’t want to come out to shop, so we’ve tied up with delivery services to keep the business running."

 

The finance ministry’s data shows a sharp rise in digital transactions, from 4.57 billion in FY20 to 8.84 billion in FY22.

 

In addition to embracing technology, some businesses had to rethink their entire product range. For Wagle, the pandemic changed the nature of what sports goods meant. "People stopped buying outdoor sports equipment like cricket bats and badminton racquets. Instead, indoor games like carrom and ludo flew off the shelves, so we pivoted to focus on those."

 

For Ratikanta Biswal, who runs a grocery shop in Balasore (Odisha), the pandemic’s timing couldn’t have been worse. He was preparing to launch his business just days before the first lockdown was announced. He adapted by selling essential items to stay afloat. "Businesses classified as essential services survived, while others were forced to pivot or close." Business owners with strong savings and financial resources chose to wait for the lockdown to be lifted to resume operations, he adds. 

 

Not all gloom

 

While many struggled, some businesses managed to thrive during the pandemic. For Ubgade, the rise in demand for ayurvedic and herbal products was a silver lining. "People are now more aware of ayurvedic remedies, and they’re spending more on their health,” he says. “Business actually boomed during Covid, and we didn’t face any constraints since we were classified as essential services."

 

Similarly, a garment shop owner in New Delhi’s Chandni Chowk, who asks not to be named, saw an unexpected opportunity in designer masks. "We were struggling, and then one day, a pharmacist asked us to stitch masks for them. We used leftover fabric, and the masks were a hit.” Now, designer masks make up 15 per cent of their business.

 

For Kothari, resilience was key. "Business is a cycle of ups and downs. The pandemic was tough, but it’s about taking the positives and moving ahead."