COVID-19, Digitalization, and Firm Productivity: A Tale of MSMEs in Two Industries

This study probes the role of Indian government support and digitalization in mitigating the challenges faced by MSMEs during COVID-19. The study focusses on firms in two key industries, namely, Pharmaceuticals and Textiles, from 2010 to 2022. Results show that the average productivity has declined during the COVID-19 period in both industries. Our econometric analysis does not provide convincing evidence of digitalization and government policy in improving the productivity of MSMEs. The significant heterogeneity in firm responses to pandemic-led shocks suggests that a one-size-fits-all solution is neither practical nor prudent in addressing the issues faced by firms following the COVID-19 pandemic.