A COMPARATIVE STUDY ON IMPACT OF COVID-19

ON SMALL BUSINESS IN GANJAM DISTRICT

Submitted in partial fulfilment of their requirements for the award of the degree of

Bachelor of Commerce (B.Com)

Submitted By

A. LOKESWARI PATRO
+3 Final Year Commerce
Exam Roll No:UG2203COM003
Registration No. :10561/2022

Under the guidance and supervision of

DR. ANNAPURNA SAHOO
(HOD,Commerce)

Department of Commerce
Khallikote Unitary University
Berhampur - 760001
Session (2024- 2025)

1
 DECLARATION

I hereby declare that this Project Report entitled "A COMPARATIVE

STUDY ON IMPACT OF COVID-19 ON SMALL BUSINESS IN
GANJAM DISTRICT" submitted to Khallikote Unitary University,
Berhampur for the award of Bachelor Degree in Commerce, is an original
record of independent work done by me under the guidance and supervision of
Dr. Annapurna Sahoo, HOD,Commerce and that this work has not been
submitted either in whole or in part elsewhere for the award of any other degree.

Berhampur
Date:

Signature of the candidate

Exam Roll Number:UG2203COM003

2
 CERTIFICATE

This is to certify that the project report entitled “ A COMPARATIVE STUDY

ON IMPACT OF COVID-19 ON SMALL BUSINESS IN GANJAM
DISTRICT” submitted by A. Lokeswari Patro bearing Examination Roll
Number UG2203COM003 for the award of Bachelor degree in Commerce has
been prepared under my guidance and supervision.

I further certify that this work has not been published anywhere or submitted to
any other university by the scholar for the said degree.

To the best of my knowledge the project report is an original piece of work and
is adequate for consideration for the award of the degree for which it is
submitted.

Berhampur
Date:

DR. ANNAPURNA SAHOO

(HOD,Commerce)
Khallikote Unitary University
Berhampur - 760001

Signature of the Guide

3
 ACKNOWLEDGEMENT

I would like to express my gratitude to my guide " A COMPARATIVE

STUDY ON IMPACT OF COVID-19 ON SMALL BUSINESS IN
GANJAM DISTRICT " who has guided me and provided me such
opportunity to undertake this project report. He has provided such an
opportunity and motivation to gain knowledge through this type of project
work. This will help me a lot in my career.

I am also thankful to my parent, my friends who gave their full-fledged co-

operation for successful of my project.

Berhampur
Date:

Signature of the candidate

4
Abstract

This study looked at the impact of the Coronavirus Disease 2019 (COVID-19)
pandemic on the revenues of small businesses operating in industrial sectors and
at the extent to which these businesses changed or adjusted their business
activity, or changed the extent to which they utilized open innovation tools and
implement innovation promotion processes. The findings show that, despite
COVID-19’s far-reaching impact in all areas of life, the revenues of most small
businesses in industrial sector were not adversely affected by the pandemic, and
most of them did not change or adjust their business activities or the extent to
which they employed open innovation tools and engage in innovation
promotion processes. The findings also indicate that small businesses, most of
whose revenues derive from subcontracting work to other businesses business to
business (B2B) and from long-term agreements, are likely to cope better during
periods of economic difficulty and under conditions of economic uncertainty.
The findings also show that businesses that are active in the international
markets have succeeded in adapting that activity to the changing demands and
various trade restrictions. This study’s theoretical contribution lies in its focus
on small businesses in the industrial sector and its examination of how the
subcontracting strategy and international operations help such businesses
contend with problems and conditions of economic uncertainty. On the practical
plane, the findings suggest that policymakers should foster programmes that
assist small businesses with these work strategies, which can help them survive,
enhance their stability and thereby also promote the economy’s ability to
withstand crisis situations.

5
 CONTENTS

 DECLARATION 02
 CERTIFICATE 03
 ACKNOWLEDGEMENT 04
 ABSTRACT 05

CHAPTER-1 INTRODUCTION PAGE NO

1.1 Introduction of Study 9-11

CHAPTER-2 Review of Literature

2.1 Overview 13-16

2.2 Theoretical Framework 17-19

CHAPTER-3 Research Methodology

3.1 Overview 21

3.2 Data Collection 22-23

3.3 Limitation 24

3.4 Analysis 25-26

CHAPTER-4 Data Analysis And Interpretation 28-50

CHAPTER-5 Conclusion 52-53

Reference 54

6
 LIST OF TABLES

SL No Particulars Page No

1 Distribution of Businesses by Sector 28

2 Distribution of Businesses According to the change in Revenue 29-31

3 Distribution of Businesses According to the Extent to Which 31

Changes and Adjustments Were Made in the Business Activity

4 Distributions of Businesses According to the Extent to Which 31-32

There was a Change in the Business’ Knowledge-acquisition

Activities and External Collaboration

5 Distributions of Businesses According to the Extent to Which 33-34

There Was a Change in the Sharing and Cultural Processes in the

Business

6 Independent Samples Test: Change in Revenue and Income from 35

Subcontracting Work

7 Independent Samples Test: The Extent to Which Changes and 36

Adjustments Were Made in the Business Activity and Income

from Subcontracting Work

8 Independent Samples Test: The Extent to Which Changes and 36

Adjustments Were Made in the Business Activity and Export sales

9 The Correlation Between the Change in Revenue and Income from 37

Subcontracting Work.

10 The Correlations Between the Extent to Which Changes and 37-38

Adjustments Were Made in the Business Activity and Income

from Subcontracting Work and Export Sales.

7
 CHAPTER-I
INTRODUCTION

8
Introduction

In December 2019, the global health crisis caused by the Coronavirus Disease
2019 (COVID-19) pandemic began in China (Akpan et al., 2020a; CDC, 2020;
Huang et al., 2020; Ting et al., 2020), catching the world unawares and
unprepared and causing significant havoc to business activities, with serious
adverse effects on small businesses (Akpan et al., 2020b; Humphries et al.,
2020). Small businesses are likely to be severely affected, as they tend to be
more concentrated in sectors that have been directly affected by the COVID-19
response measures (e.g., retail and services) and are typically more credit
constrained than larger businesses (Cao & Leung, 2020; Kumar & Francisco,
2005). Importantly, small businesses comprise the majority of companies in the
economy and are responsible for a substantial share of employment (Humphries
et al., 2020). Previous studies by Harel et al. (2019b, 2020a, 2020b) that focused
on promoting innovation in small businesses in industry sectors, showed that
small businesses that utilized open innovation tools (Harel et al., 2019b) and
implemented processes for sharing and utilizing knowledge (‘sharing
processes’; Harel et al., 2020a) and processes for developing an innovation
culture that encourages innovation (‘cultural processes’; Harel et al., 2020b),
were more successful in promoting innovation. Earlier studies on small
businesses have also indicated the impact and direct link between innovation
and business performance and growth (Baregheh et al., 2009; DTI, 2003; Smith,
2005; Taques et al., 2020). In light of COVID-19’s far-reaching impact on all
areas of life, and especially on the economy and the business sector, the aim of
the present study was to investigate the pandemic’s effect on the scope of
operations and the revenues of small businesses in industrial sectors, and the
extent to which adjustments or changes were made to business activities in
order to cope with the new challenges of this period. In order to try to assess the
COVID-19’s impact and future consequences for these businesses, the study
looks at whether, and to what extent, there were changes in the use of open
9
innovation tools or implementation of sharing and cultural processes that could
potentially foster innovation, with a corresponding impact on business
performance. The decision to study this group of businesses from among all
small businesses stemmed from the fact that this was a distinct group, in most
cases consisting of businesses that operated in traditional industrial fields and
invested relatively small sums in R&D activity. These businesses are not
engaged in high-tech and advanced technology spheres, which in a conservative
assessment can be said to have had no material and immediate impact on their
business operations. On the other hand, these businesses do not belong to the
group of businesses engaged in the fields of retail, tourism and entertainment,
which serve end consumers in face-to-face interactions, and have been directly
and severely impacted by the consequences of COVID-19. The study is
structured as follows: first, we present a short literature review, including
information and data on the COVID-19 epidemic, then provide background to
innovation in small businesses and insights regarding open innovation tools
utilized by small businesses, sharing processes and cultural processes. The next
section presents the theoretical framework, followed by the research
methodology we employed, including an explanation on the sample selection
and data collection. The following section discusses the findings and
conclusions. We conclude with the theoretical contribution made by the
research and its practical implementation and a recommendation for future
research.

The outbreak of Novel Corona virus disease is a grave menace to the entire
world affecting millions of people. Besides being detrimental to human health,
it also have negative repercussions on the global business world roiling the
entire economic system and upending trad commerce. The outburst of the
diseases was first identified in Wuhan, china in 8 December 2019. World Health
Organization (WHO) has been thoroughly assessing its global hazards, thus

10
declaring Health Emergency of international concern on 30 2020. The virus
started disseminating at an rate in different countries across the globe to
proclaim it as pandemic on 11th March 2020. Now the whole world is grappling
with this useable per enemy,. Most of the countries are under lockdown and
everything including normal life, social conditions seem to grinding to a halt.

In India, the first case of corona virus reported in Kerala on January 30, 2020.
were than reported in different cities in India. Government of India took
necessary announcing lockdown in every corner of the country on 24th March
2020. The metropolises Ahmadabad, Kolkata, Chennai are densely populated
which has given rise to a spurt in cases of Covid cities are the engines for
growth and development of Indian economy. The pandemic disruption,
inhibiting the growth environment I have been pondering mind like will
COVID-19 change the way world works, will things go back to normal as
before COVID the fundamental change take place in common public, business
people, industrialists, few months will be very crucial. We have to alter the
concept of normal in this pandemic. If past trends of similar infections are
analyzed, it can be helpful conclusion as to what we should be due to move
How can we overcome this mass vaccination or social are we expecting in the
time of Covid I can express that liquidity is expected to reduce as the borrowing
cost in real terms will be increased. is continuously making an effort to soften
interest rates. Commercial banks and financial institutions are tensed due to the
fear of insolvency.

11
 CHAPTER-II

REVIEW OF LITERATURE

12
Review of Literature

COVID-19, which was declared a global pandemic by the World Health

Organization (WHO, 2019), has now infected more than 45 million persons and
caused more than 1 million deaths as of the end of October 2020 (ECDC, 2020).
The frantic effort to curtail the human-to-human transmission of COVID-19 led
to a lockdown of communities and business closures (Akpan et al., 2020a).

In the wake of this global health crisis and to avoid shutdown of economic
activities, the use of some technologies that were not considered essential by
small businesses became crucial to avoid a complete shutdown of the global
economy (Ting et al., 2020). Many businesses of all sizes have since
implemented technologies such as Zoom virtual meetings and other methods
(Ting et al., 2020; Webster, 2020). These technologies became one of the
survival strategies during the lockdown of communities by different levels of
the government meant to contain the spread of the COVID-19 pandemic and
enable the management of operations and projects remotely (Vaccaro et al.,
2020), or conduct business meetings without physical contact among employees
(Puddister & Small, 2020; Vaccaro et al., 2020). Businesses in certain sectors
that were defined by the authorities as essential for continuing economic
conduct were allowed to continue their activities under restrictions like
maintaining distance between employees. Yet, it is unimaginable how things
would have gone had the technologies currently in use by businesses during this
global health pandemic not been as pervasive (Akpan et al., 2020b). On the
other hand, the epidemic and the resulting lockdown have accelerated and
magnified the impact technology can have on some organizations’ business
models. Many small businesses have also been able to utilize new techniques to
adapt and improvise their business models (Puddister & Small, 2020; Vaccaro
et al., 2020). Notable examples include personal training, tutoring and client
consulting, using virtual video platforms like Zoom (Puddister & Small, 2020)

13
and restaurants that have turned to take away and delivery options backed by
online meal ordering (Pantelidis, 2010).

Addressing Innovation in Small Businesses

According to the OECD, innovation is defined as the introduction of a new or

significantly improved product or the implementation of a new process,
marketing method or organizational method in business practices, workplace
organization or external relations (OECD, 2005). According to the European
Union (EU) Commission, small businesses are defined as businesses that
employ up to 50 employees (European Commission, 2003) and are often
characterized by limited regional activity and relatively small market share
(Yew Wong & Aspinwall, 2004). Small businesses often operate in niche and
highly specific markets and are able to provide something different from
standardized products and services offered by large companies. In industry
sectors particularly, many small businesses act as specialist suppliers of parts,
components and subassemblies (Yew Wong & Aspinwall, 2004), and many
large companies are using small businesses as subcontractors to incorporate
specialized skills and to perform tasks that are not part of their core business
(Tudorneau et al., 2018). Small businesses are perceived as an important growth
driver in the economy (Henrekson & Johansson, 2010; OECD, 2009), and in the
ever-changing economic environment, their advantages are expressed in
flexibility, rapid response, adaptability to market changes and quick decision-
making (Bommer & Jalajas, 2004; Tzadik, 2007; Vossen, 1998). Harel et al.
(2019a) point out that despite the difficulties small businesses face in promoting
innovation, a substantial part of small businesses in industry sectors are actively
engaged in various types of innovations, although many of these innovations are
relatively minor.

14
Open Innovation

The changes that have taken place in recent decades worldwide have led to
changes in the innovation concept, from a closed model based on internal
resources to an open innovation (‘OI’) model characterized by going beyond the
business borders. OI can be expressed in the acquisition of technology or
knowledge, the use of networking, cooperation with external entities for product
design, etc. The OI model enables businesses to employ both internal and
external pathways and, concurrently, to acquire knowledge from external
sources. Using the OI model enables small businesses to become part of the
innovation landscape (Bigliardi & Galati, 2018; Chesbrough, 2003) because
only a small number of them have sufficient ability to manage the entire
innovation process independently, and they need to collaborate with other
entities (Mitra, 2019). Harel et al. (2019b) differentiated between OI tools
aimed at acquiring knowledge in a unidirectional manner from external open
sources of information, like Internet searches for professional information or
attending professional conferences, and OI tools aimed at obtaining knowledge
by interacting with other factors in the business ecosystem. Lee et al. )2010),
Radziwon and Bogers (2018) and Van de Vrande et al. (2009) also argue that
small businesses need to find ways to benefit from economies of scale and
therefore must develop external relationships in order to find the resources they
lack for innovation.

Processes for Sharing and Utilizing Knowledge in the Business

Knowledge is one of the main sources for innovation and creation of a

competitive edge for any business (Caloghirou et al., 2004; Weijs-Perrée et al.,
2019). However, exposing a business to new external knowledge is not
sufficient for innovation (Jansen et al., 2005). In order to use the new
knowledge effectively, a business must develop appropriate structured

15
processes that will make it possible to integrate it into the existing knowledge
(Björk et al., 2010). These structured processes are composed of regular and
consistently practised patterns of individual and business behaviours that
institutionalize and organize knowledge through activity and conduct in the
business (Knight & Cavusgil, 2004).

Processes for Creating an Organizational Culture that Encourages

Innovation

Previous studies have shown that organizational culture is an important resource

for promoting innovation and contributes greatly to business performance and
growth (Ali & Park, 2016; Do et al., 2018; Hoyte, 2019). Organizational culture
is defined as a framework of shared values and beliefs for employees at all
levels of the organization that are reflected in its characteristics, and
organizational culture that encourages innovation includes behaviour that
demonstrates an appreciation of creativity, risk-taking, freedom, teamwork,
communication, trust and respect (Dobni, 2008; Miron et al., 2004). Developing
such organizational culture is an integral part of the innovation process
(Dasgupta & Gupta, 2009; Terziovski, 2010). Each organization has elements of
leadership, skills, infrastructure, values, culture and processes (Popli & Rizvi,
2016), and the challenge is to adapt these components to an innovation
framework that is compatible with the organization and its objectives
(Skarzynski & Gibson, 2013). The creation of a suitable organizational culture
that encourages communication and knowledge sharing will make it available
for use by the entire organization (Woodfield & Husted, 2017).

16
Theoretical Framework

Many small businesses operate in the retail and service sectors and serve the
end consumer through face-to-face interactions. These sectors were the most
adversely affected by the COVID-19 pandemic, due to the restrictions and
closures imposed by the authorities (Cao & Leung, 2020). As noted, small
businesses often operate in niche and highly specific markets and are able to
provide something different from standardized products and services offered by
large companies. In the industry sectors particularly, many of them act as
specialist suppliers of parts, components and subassemblies and work as
subcontractors to large industrial companies (Yew Wong & Aspinwall, 2004),
which for the most part continued to operate during the COVID-19 period, in
view of their status as essential industrial enterprises to the economy. Hence, the
following hypotheses:

H1: The revenue of most small businesses in the industry sector did not
decrease during the COVID-19 period as compared to the corresponding period
last year.

H2: Most small businesses in the industry sector have not made changes or
adjustments in their business activity during the COVID-19 period.

H3a: Most small businesses in the industry sector have not reduced their use of
open innovation tools (knowledge-acquisition activities and external
collaboration) during the COVID-19 period. H3b: Most small businesses in the
industry sector have not reduced the extent to which sharing processes were
taking place in the business and the extent to which there was a change in the
cultural processes implemented in the business during the COVID-19 period.
H4a: The rate of revenue from subcontracting work among businesses, whose
revenues grew or remained unchanged during the COVID-19 period, is higher

17
than the rate of revenue from subcontracting work among businesses that
experienced a revenue drop during this period.

H4b: There is a negative relationship between the rate of revenue from

subcontracting work and the change in revenue during the COVID-19 period,
such that businesses with a high rate of revenue from subcontracting work
displayed revenue growth or unchanged revenues during the pandemic.

H5a: The rate of revenue from subcontracting work among businesses that
changed or adjusted their business activity during the COVID-19 period is
lower than the rate of revenue from subcontracting work among businesses that
made no changes or adjustments during that time.

H5b: There is a negative relationship between the extent to which changes or

adjustments were made in the business activity and income from subcontracting
work such that businesses with a high rate of revenue from subcontracting work
show lower levels of change or adjustment in business activity.

Earlier studies noted the contribution of operating in international markets to

business innovation (Autio et al., 2000; Chetty & Campbell-Hunt, 2005;
Madsen & Servais, 2004; Rialp et al., 2005; Zahra et al., 2000). The wider the
range of foreign markets and cultures in which a business is active, the greater
the firm’s exposure to knowledge sources and to new and varied ideas that
allow it to develop the capabilities and faster learning processes necessary for
innovation and for the advancement of business opportunities. Thus, businesses
that operate in the international market show greater flexibility that makes them
better able to cope with change than businesses active solely in the local market
(Autio et al. 2000; Zahra et al., 2000). Also, the pandemic began at different
times in different countries, with differing levels of impact around the world.

18
Hence, the following hypotheses:

H6a: The rate of revenue from export sales among businesses whose revenues
grew or remained the same during the pandemic is higher than the rate of
revenue from export sales among businesses whose income dropped during that
time.

H6b: There is a positive relationship between export sales and the change in
revenue during the COVID-19 period such that businesses with a high rate of
revenue from export sales showed revenue growth or unchanged revenues
during the COVID-19 period.

H7a: The revenue rate from export sales among businesses that made changes
or adjustments to their activity during the pandemic is higher than the revenue
rate from export sales among businesses that made no changes or adjustments
during that period.

H7b: There is a positive relationship between the extent to which changes or

adjustments were made in the business activity and export sales, such that
business with a high rate of revenue from export sales show a higher degree of
change and adjustment in their business activity during the pandemic.

19
 CHAPTER-III

RESEARCH METHODOLOGY

20
Research Methodology

The sample included small businesses in the industry sectors in Israel that
employ between 10 and 50 employees. The study included 50 business
managers out of a group of 202 business managers that participated in the
earlier study by Harel et al. (2019a). The businesses in the present study were
selected based on innovation scores, on measures of OI tool utilization and on
the existence of sharing and cultural processes within the business as found in
the prior study. Given that most of the questions in the present study focused on
changes in business activity in the context of OI tool use and sharing/cultural
processes, it was necessary to choose businesses that utilized OI tools at
moderate or higher levels and in which sharing/cultural processes were present
to a moderate or higher degree. For example, there was no point in investigating
changes in a business’ scope of collaboration with external entities, if it had
engaged in no such collaborations prior to the COVID-19 pandemic. The
business selection for the previous study was based on data from the Israeli
Industry and Craft Association that included all small businesses in these
sectors, which by law were incorporated into this organization. The study author
contacted these 50 small business managers, all of whom agreed to a telephone
interview, resulting in a response rate of 100%. The interviews were conducted
by telephone (call was initiated by the study author to the business managers to
their personal mobile phone). In light of the acquaintance from the earlier study,
none of the managers refused to participate in the interview for the current
study. No incentive was offered to the study participants. During the interview,
which lasted for about 10–15 min, the study author filled in the answers in the
questionnaire form, which was prepared by him in advance. The interviews
were not digitally recorded, but the study author recorded the responses in
handwriting as stated during the interview.

21
Data Collection

All interviews without exception were conducted by the study author only (in
the present study, there is only one author). Data collection was conducted using
a structured questionnaire that was divided into two parts, allowing business
managers to expand and explain their answers to each question: The structured
questionnaire that was used during the interviews was prepared in advance by
the study author himself, so that he was aware of the purpose, propositions and
research objectives before the interview phase. This also ensured consistency in
all of the interviews. The first part dealt with the changes in revenue and the
extent to which changes or adjustments were made in the business activity
during the pandemic period. The second part dealt with the extent to which
there was a change in the business’ usage of open innovation tools (activities for
identifying and obtaining knowledge from external open sources of information
—‘knowledge-acquisition activities’ and collaboration on innovation with
external entities—‘external collaboration’), the extent to which there was a
change in the sharing processes that were taking place in the business and
cultural processes that were implemented in the business during the COVID-19
period as compared to the same period last year. The changes were examined
according to the items included in the indices used by the researchers in their
previous studies (Harel et al., 2019b, 2020a, 2020b). The knowledge-acquisition
activity index based on a validated index used by Caloghirou et al. (2004)
consists of six items: searching patent databases; searching the Internet for
professional information; entering competitors’ sites; analysis of competing
products; participating in exhibitions and professional conferences; and
collecting data from the professional press. Each manager was asked to estimate
the extent to which there was a change in the business’ usage of knowledge-
acquisition activity during the COVID-19 period according to these items on a
5-point Likert scale (from 1 to 5). The external collaboration index is based on

22
Marques and Ferreira (2009) and includes the number of collaborations to
promote innovation with external entities such as suppliers, customers, other
businesses, consultants, etc. The sharing processes include five practices:
holding weekly meetings for sharing information, transferring information to
employees, reporting on external information after participating in conferences
or meeting with customers, processes for implementing innovations in the
business and taking responsibility for promoting innovation issues as formal
part of the job of an employee other than the manager. Managers were asked to
estimate the extent to which there was a change in these processes in the
COVID-19 period on a 5-point Likert scale (from 1 to 5). The cultural processes
include 10 practices based on validated indices used by Terziovski (2010) and
Skarzynski and Gibson (2013): encouraging employees to engage in informal
meetings, monitor their own performance, share knowledge, teamwork,
experiment with new ways of doing things, creativity in employee remuneration
(Terziovski, 2010), discussing innovation in meetings with employees,
encouraging employees to propose new ideas, implementing employees’ new
ideas and including creativity and innovation capabilities as part of the hiring
process of new employees (Skarzynski & Gibson, 2013). Managers were asked
to assess the extent to which there was a change in these processes in the
COVID-19 period on a 5-point Likert scale (from 1 to 5). The characteristics of
the businesses and the business managers were picked up from the previous
study so that they could be presented according to the number of businesses in
the current study. The characteristics of the business are as follows: industry
sector, size (based on the number of employees), age, level of sales for export
(export to total sales ratio), proportion of sales from subcontracting work to
total sales and sales by business’ customer type (B2B or B2C). The
characteristics of the business managers are as follows: managerial experience,
number of businesses the manager has managed and being the owner of the

23
business. The study author performed all coding and analysis of the data, as
well as the statistical tests.

Limitation of the Study and Future Research

The findings were based on data provided by business managers during the
interviews and were based only on one manager per business. Future research
could expand the circle of research participants in each business, so as to cross-
reference the responses.

Future study should also include larger sample of businesses as well as small
businesses in other industries, such as commercial, service and financial
companies and small businesses in the periphery. This would make it possible
to determine whether differences exist between the various sectors, and whether
geography has an impact. In addition, it would be interesting to compare the
effects and consequences of the COVID-19 pandemic to other economic crises
and recession events that have occurred in the past.

Acknowledgement

The author is grateful to the anonymous referees of the journal for their
extremely useful suggestions to improve the quality of the article. Usual
disclaimers apply.

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the

research, authorship and/or publication of this article.

Funding

The author received no financial support for the research, authorship and/or
publication of this article.

24
Analysis

The findings are presented in two parts. The first part comprises descriptive
statistics and presents the characteristics of the businesses, the characteristics of
the business managers and the businesses’ distributions according to the
following: change in revenue and the extent to which changes or adjustments
were made in the business activity during the COVID-19 period, the extent to
which there was a change in the business’ usage of open innovation tools
(knowledge-acquisition activities and external collaboration) and the extent to
which there was a change in the sharing processes that were taking place in the
business and cultural processes that were implemented in the business during
the COVID-19 period as compared to the same period last year. Quotes from
the business managers are also included to provide explanations and support for
the answers they gave in the structured questionnaire. The second part is the
main analysis. In the first stage, t-tests for independent samples were conducted
to determine whether there were any differences between the businesses whose
revenues increased or remained unchanged during the pandemic and those
whose revenues declined, as well as to investigate the differences between the
businesses where changes or adjustments were made to business activity during
the pandemic and businesses where no such changes or adjustments were made.
Differences between the business groups were examined with regard to the
following research variables: business characteristics, business manager
characteristics, the extent to which there were changes in business activity
aimed at identifying and acquiring external knowledge, the extent of
collaboration with external entities (Harel et al., 2019b), the extent to which
sharing processes were taking place in the business (Harel et al., 2020a) and the
extent to which there was a change in the cultural processes implemented within
the business (Harel et al., 2020b) during the pandemic. In the second stage,
Pearson correlation coefficients were used to determine the extent to which a

25
relationship exists between change in revenue and the extent to which changes
or adjustments were made to business activity during the COVID-19 period, and
the other research variables noted earlier.

26
 CHAPTER-IV

DATA ANALYSIS AND

INTERPRETATION

27
Descriptive Statistic

The distribution by sectors (according to Israel’s Central Bureau of Statistics

classification) of businesses in the sample is presented in Table 1. Table 1
shows that one quarter of the businesses are in the metal industry, another
quarter in the chemical and plastics industries, and another quarter in the field of
mechanical equipment and transportation. In addition, 40% of the businesses in
the sample have between 10 and 19 employees, while 26% have between 20 and
29 employees and 34% have between 30 and 50 employees. The average
number of employees is M = 26.4 (SD = 13.9), and the average age of
businesses in the sample is M = 29.3

(SD = 13.7). A total of 40% of the businesses export their products, and 50% of
them work as subcontractors, while, for 90% of the businesses, most of their
sales are to other businesses (B2B). Characteristics of the Business Managers
The average number of years of management experience was M = 26.7 (SD =
10.4). More than 70% of the business managers had managed only one or two
businesses, indicating that despite many years of experience, their management
experience was not diverse. This finding can be explained by the fact that in
88% of the businesses in the sample, the manager of the business was also its
owner. Business Activity, Utilization of Open Innovation Tools and

28
Implementation of Sharing and Cultural Processes During the Coronavirus
Pandemic The distribution of businesses according to the change in revenue
during the COVID-19 period as compared to the same period last year is
presented in Table 2. Table 2 shows that the revenues of half of the businesses
did not decline as compared with the same period last year, and that 8% of the
businesses actually showed a revenue increase for this period. Only 10% of the
businesses suffered more than a 25% revenue drop as compared with the same
period last year, while only one business—the apparel sector—completely
ceased operations during the pandemic.

Following are quotes from the managers of businesses whose revenues

increased during this period: C, manager of a business that produces electrical
switches for communication networks, 100% of whose revenues come from
subcontracting work and over half from export sales, said: ‘The communication
equipment sector is growing, and during the coronavirus period it has actually
grown faster. So, the company has recently enjoyed growth in activity’.
According to Z, the manager of a business that manufactures plastic products,
95% of whose revenues are from subcontracting for customers in the defence
industry and 25% from export sales: ‘Everything to do with defense just
increased during this period, and so demand for our products grew’. According
to M, the manager of a company that produces and markets manual irrigation
system equipment, 25% of whose revenues come from subcontracting work and

29
over half from export sales: ‘There’s been increased demand for irrigation
products, along with growth in sales, especially to existing customers. The
growth is due to the increased free time of private individuals who aren’t
working, who apparently are devoting more time to their home gardens’.
According to R, manager of a business that manufactures outdoor furniture,
100% of whose revenues come from subcontracting work for customers in the
local market: ‘The coronavirus situation is good for the company, since there’s
more work in the field of Perspex dividers’. The distribution of businesses
according to the extent to which changes or adjustments were made in the
business activity during the COVID-19 period is presented in Table 3. Table 3
shows that 60% of the businesses made no changes or adjustments to their
activity (e.g., changes in the products or services they provide) during the
pandemic, 30% made changes to a relatively low degree and just 10% of the
businesses made changes to a high degree. To follow are quotes from business
managers who made no changes or adjustments in business activity during the
pandemic. B, the manager of a firm that produces optical components for the
defence industry, all of whose revenues come from subcontracting for
customers in the local market, said: ‘There was no change in our existing
business activity, as the company has a half-year order pipeline. There’s a risk
that the problem will arise in the coming months, in fulfilling the order pipeline
for the next period, since the customers’ purchasing departments are working at
smaller volumes right now. Another impact is the cessation of new initiatives
that we started on, as new equipment can’t be purchased and installed’.
According to T, manager of a business that manufactures metal cable
conductors for the electric power industry: ‘There was no change in our
business activity or in the demand for our products, and we’re working as
usual’. According to D, manager of a metalworking firm, 100% of whose
revenues come from subcontracting work: ‘Our business activity volume
declined due to a drop in orders, mainly from abroad, and so we stopped our

30
night shift to cut expenses. Beyond that, we’ve made no changes or adjustments
to our activity’. T, manager of a firm that manufactures elevator control
products, 85% of whose revenues are from exports, said: ‘We’ve made no
changes or adjustments as we’ve managed.

despite everything, to maintain our activity level. The world is getting flatter
and we can meet with customers via Zoom much more easily. This brought us
closer to customers abroad and that’s a big change since I used to have to fly all
the time in order to close deals’. The distributions of businesses according to the
extent to which there was a change in the business’ activities for identifying and
obtaining knowledge from external open sources of information (‘knowledge-
acquisition activities’) and to the extent to which there was a change in the
business’ collaboration on innovation with external entities (‘external

31
collaboration’) are presented in Table 4. Table 4 shows that over 60% of the
businesses made no changes during the pandemic in their activities to acquire
knowledge from external entities, while a third of the businesses increased their
activities in this sphere. Additionally, a quarter of the businesses anticipated that
they would continue increasing their efforts to identify and acquire knowledge
from external entities in the future, even once the pandemic ended and things
returned to normal. Following are quotes from managers who increased their
businesses’ activities to identify and acquire knowledge. A, the manager of a
paramedical equipment company that experienced no change in sales volume,
said: ‘We succeeded in maintaining our revenue level because we developed a
new product related to the process of filling syringes for coronavirus
inoculation, which grew out of our relationship with our main customer, a large
German firm. We heightened our efforts to acquire external knowledge for
purposes of developing the new product and intensified our collaboration with
the customer and with external consultants in order to advance the project’.
According to O, manager of a company that manufactures printing products:
‘We’re trying to enter new fields such as printing on children’s toys, and to
move in the direction of products rather than services, and so we need to acquire
more external knowledge that isn’t in our possession’. According to P, manager
of a business that produces car air conditioner components: ‘I was forced to
make big changes due to operating in the field of passenger vehicles which took
a harsh immediate hit. We entered new fields, such as coronavirus disinfection
equipment, ambulance adaptation for transporting coronavirus patients, and the
like. In light of our entry into new areas of activity, we had to seek new
knowledge about things we weren’t familiar with’. Table 4 also shows that,
during the pandemic, over 60% of the businesses made no changes in the scope
of their collaboration with external entities for purposes of innovation
promotion, while a third of the businesses actually increased their collaboration
levels. Moreover, 30% of the businesses anticipated that they would continue

32
increasing their levels of external collaboration in the future, even once things
returned to normal after the pandemic.

According to A, manager of a printing press: ‘Due to the drop-in activity, we

entered into collaboration with another printing press firm that specializes in
large format and doesn’t have digital activity, so we’re complementing each
other’s areas of operation. We intend to continue growing this collaboration in
the future, as the market is moving in the direction of creating large entities and
moving to digital’. According to S, manager of a firm that produces duster
cloths: ‘We were forced to make changes and adjustments to our products. We
started collaborating with an external entity on a new product for covering
children’s strollers for coronavirus protection, and on the production of special
cloths and protective masks against corona’. Other business managers,
including managers in the printing and metalworking fields, reported heightened
collaboration with comparable businesses in the sector, not necessarily to
promote innovation, but in order to effect savings and economies of scale by
sharing production resources. The distributions of businesses according to the
extent to which there was a change in the sharing processes that were taking
place in the business and to the extent to which there was a change in the
cultural processes that were implemented in the business are presented in Table
5. Table 5 shows that, in two-thirds of the businesses, there was no change in

33
the extent to which sharing processes took place during the pandemic, while
over a quarter of the businesses engaged more extensively in sharing processes.
Additionally, 14% of the businesses anticipated that they will continue
expanding their sharing processes even after the pandemic ends and things
return to normal. For most of the businesses that engaged more extensively in
sharing processes, this was due to social distancing requirements and to the
switch to online meetings, as well as to rapidly changing official guidelines and
restrictions. According to the manager of a plastics business: ‘The shift to
digital and to cloud computing brought an increase in the use of information-
transfer and documentation processes, including online meetings via Zoom for
information transfer, where everything is documented and recorded’. Another
example can be seen in businesses that were forced to make changes in their
activity and undertook new operations. As noted by J, the manager of a plastics
firm: ‘We increased our information transfer to employees, because we had to
transmit information to them for the development of the new activity, including
knowledge we acquired from external consultants that also manifested in
changes in the business’s computer and control systems’. According to Z,
manager of a business that manufactures components for diamond processing
machines: ‘I was forced to move employees to other jobs, due both to employee
absences because of the restrictions and the desire to reduce expenses at this
time, and so we had to expand the information transfer processes, including in
the control processes’.

34
Table 5 also shows that 90% of the businesses showed no change in the
implementation of cultural processes during the pandemic, and that two
businesses actually expanded their cultural processes during this time. A total of
98% of the businesses anticipated no change in the assimilation of cultural
processes within the business even after normal life resumes in the post-
COVID-19 period.

Main Analysis

Following are the results of the tests to determine the differences between the
groups of businesses—t-tests

Revenues

Independent sample t-test results of the change in revenue and income from
subcontracting work are presented in Table 6. In the examination of the
differences in rate of revenue from subcontracting work between the group of
businesses whose revenues increased or stayed the same and the group of
businesses whose revenues declined, it was found that the average rate of
revenue from subcontracting work in the group whose income rose/stayed the
same (M = 55.0, SD = 47.0) was significantly higher than the average rate in the
group whose revenues dropped (M = 25.0, SD = 41.3) (t(48) = −2.40, p < 0.05).

35
Changes or Adjustments to Business Activity

Independent sample t-test results of the extent to which changes or adjustments

were made in the business activity and income from subcontracting work are
presented in Table 7. In the examination of the differences in rate of revenue
from subcontracting work between the group of businesses where changes or
adjustments were made to business activity during the pandemic and the group
of businesses where no changes were made, it was found that the average rate of
revenue from subcontracting work in the group where changes or adjustments
were made (M = 25.2, SD = 40.6) was

significantly lower than the average rate in the group of businesses where no
changes or adjustments were made (M = 48.8, SD = 47.9) (t(48) = −1.81, p <
0.05). Independent sample t-test results of the extent to which changes or
adjustments were made in the business activity and export sales are presented in
Table 8. Examining of the differences in revenue rate from export sales between

36
the group of businesses where changes or adjustments were made to business
activity during the pandemic, and the group of businesses where no changes
were made, revealed that the average rate of revenue from export sales in the
group where changes or adjustments were made (M = 31.8, SD = 41.4) was
significantly higher than the average rate in the group of businesses where no
changes were made (M =12.6, SD=25.9) (t(48) =2.0, p<0.05).

Correlations Between the Research Variables

The correlation between the change in revenue and income from subcontracting
work is presented in Table 9. Table 9 shows positive correlations between the
change in revenue and income from subcontracting work, that is, in businesses
where income from subcontracting work is relatively high, their revenue during
the COVID-19 period increased or remained unchanged. No correlation was
found between the change in revenue and export sales. The correlations between
the extent to which changes or adjustments were made in business activity and
income from subcontracting work and export sales is presented in Table 10.
Table 10 shows positive correlations between the extent to which changes or
adjustments were made in the business activity and export sales, and negative
correlation between extent to which changes or adjustments were made in the
business activity and income from subcontracting work, that is, in

37
businesses where the revenue rate from export sales is relatively high, the extent
to which changes or adjustments were made in the business activity during the
COVID-19 period was higher, and in businesses where income from
subcontracting work is relatively high, the extent to which changes or
adjustments were made in the business activity during the COVID-19 period
was lower.

Discussion

The present study empirically investigated the COVID-19 pandemic’s impact

on the scope of operations and revenues of small businesses in industrial sectors
as compared to the same period the previous year. It also looked at the extent to
which businesses made adjustments or changes to their business activity in
order to cope with the new challenges posed by the pandemic. We also looked
at the relationship between a business’ rate of revenue from subcontracting
work/export sales and its change in revenue/the extent of business activity
changes or adjustments that the business had to make during the COVID-19
period. Moreover, in order to assess the impact and future implications of
COVID-19 for these businesses, the study asked whether, and to what extent,
there were changes in the utilization of open innovation tools and in the
implementation of sharing and cultural processes that could potentially promote
innovation within the business and, accordingly, business performance.

38
Revenue, Changes or Adjustments to Business Activity, and Changes in the
Utilization of Open Innovation Tools and Sharing/Cultural Processes
During the COVID-19 Pandemic

The study findings showed that the revenues of over half of the businesses were
not harmed during the pandemic as compared to the same period the year
before, and even 8% of the businesses actually saw a revenue increase during
the pandemic. These findings support research hypothesis H1, according to
which the revenues of most of small businesses in the industry sectors did not
decrease during the COVID-19 period. The explanations given by the business
managers for these findings focused on the sectors in which the businesses
operate, for example communications, defence, medical equipment, plastic
components for special uses—sectors that were not adversely affected by the
pandemic. The managers also note their businesses’ ability to utilize new
communication technologies like Zoom, which has enabled them to continue
their business activity while staying in touch with employees and customers
online. Thus, the managers supported the study findings of Ting et al. (2020)
and Webster (2020), regarding the adoption and utilization of new technologies
during the pandemic, as well as the study findings of Vaccaro et al. (2020) and
of Puddister and Small (2020), who argued that these technologies became one
of the survival strategies during the pandemic, that enabled the management to
operate remotely and conduct business meetings without physical contact. The
study findings showed that 60% of the businesses made no changes or
adjustments to their business activity during the pandemic, thereby supporting
research hypothesis H2. The business managers explained that they worked on
the basis of a lengthy order pipeline, most of it subcontracting work for big
customers, meaning that the demand for their products did not change during
the period in question. Also, those businesses whose revenues declined during
the pandemic made efforts to reduce expenses, whether by cancelling night

39
shifts, laying off workers or other means; however, as noted, no changes or
adjustments (e.g., altering the product mix or the means of service provision)
were made to the business activity itself.

The findings also indicated that over 60% of the businesses made no changes
during the pandemic in their activities to acquire knowledge from external
entities or in the scope of collaboration with external entities. Moreover, a third
of the businesses actually increased their activity in these spheres. The business
managers explained the increased activity in terms of efforts to expand the
product line or to enter new areas of activity—efforts that entailed the
acquisition of new knowledge. Also, changes and adjustments to products, or
the desire to reduce expenses and achieve economies of scale, led to increased
collaboration with external entities, generally with a main customer or with
other businesses in the same sector. The findings also indicated that, for two-
thirds of the companies, there was no change in the extent to which sharing
processes took place within the business during the pandemic, while, for over a
quarter of the businesses, such processes occurred to an even greater degree. In
90% of the firms, there was no change in the extent to which cultural processes
were implemented during the COVID-19 period. According to the managers of
businesses who displayed greater engagement in sharing processes, this was due
mainly to social distancing limitations and to the shift to online meetings, as
well as to rapidly changing official guidelines and restrictions. And as the
manager of a plastics business aptly noted: ‘The shift to digital and to online
Zoom meetings led to increased utilization of knowledge transfer processes and
to increased documentation’. These findings confirm research hypotheses H3a
and H3b—that most small businesses in the industry sector have not reduced
their use of the open innovation tools and the extent to which sharing and
cultural processes were taking place and implemented in the business during the
COVID-19 pandemic period. These findings are very encouraging in terms of

40
the future, as most of the businesses maintained, and some even increased, their
utilization of OI tools, and also continued engaging in sharing and cultural
processes for innovation promotion purposes. One may therefore anticipate that
the innovation level of most small businesses in the industrial sectors will not be
adversely affected in the future, and may even rise, given the increased efforts
of a large proportion of these firms to identify and utilize external knowledge,
and the increased innovation-oriented collaboration with external entities (Harel
et al., 2019b).

Impact on Revenues

The study findings showed that the rate of revenues from subcontracting work
for those businesses whose revenues increased or remained unchanged during
the pandemic was higher than that of businesses whose revenues declined,
pointing to a significant relationship between the change in revenue levels
during the pandemic and revenues from subcontracting work, such that
businesses whose rate of revenue from subcontracting work was relatively high
showed increased or unchanged revenues. These findings support research
hypotheses H4a and H4b, regarding the relationship between change in revenue
and rate of revenue from subcontracting work. Findings from previous studies
support these findings of the current study. Nwokocha et al. (2019) found that
the subcontracting relationship between large-scale industries and small
businesses is inclined to production and product-related cooperation, where the
contractors are concerned with meeting fluctuation in demand and shortening
long delivery times. According to Nwokocha et al. (2020), production
subcontracting strategy is instrumental in the survival of small businesses in the
industrial sector, given the ability to guarantee reductions in operating costs and
risk, and resources’ accessibility. We can thus see that small businesses in the
industrial sectors that work as subcontractors and, in particular, that have long-
term contracts with big customers, are likely to cope better during periods of

41
economic distress and under conditions of economic uncertainty. Businesses
whose sales are based primarily on other businesses (B2B) and that do not serve
private end customers (B2C) through face-to-face interaction, cope better during
periods of restrictions and unexpected situations, such as a global pandemic. No
significant relationship was found between change in revenue during the
pandemic and export sales. These findings do not support research hypotheses
H6a and H6b. The findings contradict the expectation that businesses active in
international markets and exposed to new knowledge and ideas that allow them
to develop the ability to learn quickly and the flexibility to deal with change
(Autio et al., 2000; Zahra et al., 2000) will be less adversely affected by extreme
situations of economic distress, uncertainty and restrictions.

Changes or Adjustments to Business Activity

According to the study findings, the rate of revenue from subcontracting work
for businesses that made changes or adjustments to their business activity is
lower than the rate for businesses that made no such changes or adjustments.
This points to a significant relationship between the extent of the
changes/adjustments made to business activity and the rate of revenue from
subcontracting work. In businesses where income from subcontracting work
was relatively high, the extent to which changes or adjustments were made in
the business activity during the COVID-19 period was lower. These findings
support research hypotheses H5a and H5b. The study findings also
demonstrated that export sales of businesses that made changes or adjustments
to their business activity were higher than businesses that made no such
changes, indicating a significant relationship between the extent of the
changes/adjustments made to business activities and export sales. In businesses
where export sales was relatively high, the extent to which changes or
adjustments were made in the business activities during the COVID-19 period
was higher. These findings support research hypotheses H7a and H7b, showing

42
that businesses active in the international market were exposed to knowledge
and ideas that contributed to innovation and promoted business opportunities,
thereby developing the capabilities and flexibility necessary to cope with
change, to a higher degree than businesses active solely in the local market.
Businesses active in the international market whose revenue rate from export
sales was relatively high managed to make changes and adjustments to a higher
degree, and to adapt their business activities to developments on the ground and
to the changing requirements of customers around the world. They also
succeeded in adjusting to the myriad trade restrictions imposed by different
countries at different times and in varying degrees. And as the manager of a
firm that manufactured and marketed musical toys put it: ‘We’re exporters and
we had to make changes and adjustments in order to cope with the restrictions
that were placed on international trade, in terms of moving some of our activity
online, in terms of price and product mix adjustments, and in terms of
marketing adjustments, including the nature of our meetings with customers’.
The findings of earlier studies by Zahra et al. (2000), Autio et al. (2000) and
Laursen and Salter (2014) support the present study’s findings concerning the
relationship between business activity in international markets and development
of the learning skills and flexibility necessary to cope with changes in the
market.

43
COVID 19 & Its Impact on Odisha Economy

The COVID-19pandemic has dealt a severe blow to the economies at all levels -
global, national and regional. The International Monetary Fund (IMF] forecasts
that the global output is to contract sharply by –3 percent in 2020, much worse
than that during the 2008–09 financial crisis. The advanced economies are set to
witness a much larger contraction in output by – 6.1 percent and emerging and
market economies by -1 percent. It further warns that the risks would be severe
and substantial. For India, different agencies have provided varying growth
estimates for 2020-21. The IMF has projected it to be 1.9 percent; Fitch Ratings
has forecast 0.8 per cent growth. In early April, the Asian Development Bank
(ADB) had forecast a 4 per cent growth for India. Rangarajan and Srivastav
have estimated 4.4 per cent growth for India in 2019-20 and 2.94 per cent in
2020-21. The professional forecasters’ projection of real GDP growth given in
the monetary policy report of the Reserve Bank of India (RBI) released in April
2020 reports 4.6 per cent growth in the last quarter of 2019-20, 4.7 per cent in
the first quarter, 5.3 per cent in the second quarter, 5.7 per cent in third quarter
and 6.1 per cent in the fourth quarter. However, given the length of complete
lockdown in India and suspension of most of the economic activities in the first
quarter, it is hard to believe that the Indian economy would be able to achieve
any growth in 2020-21. There is serious apprehension that the total national
output would contract drastically in the first quarter, although there could be
some improvement in the subsequent quarters; growth of total output would not
be higher than that in the last year. Therefore, the fear of a double digit
contraction in the output looms large. Odisha started imposing partial lockdown
from March 21 and by March 22 it was extended to the entire state. With the
assumption that the lockdown would be relaxed from early June, two months of
the first quarter were to fall under the lockdown. Although the state and national
governments have relaxed some selected economic activities in the lockdown

44
3.0 (starting from May 4), the operation of those sectors is far from normal.
Even if the lockdown has been relaxed from mid-May, there would be a lot of
restrictions in most of the economic activities. Therefore, the effect of COVID-
19 would continue in the second and third quarters. We would expect normal
activities towards the fourth quarter. If we look at each sector independently
during this fiscal year, agriculture is the least affected compared to all other
sectors. The manufacturing and service sectors have emerged the worst-hit
sectors due to lockdown. Odisha’s export to the world amounts to around 16 per
cent of the GSDP. Due to the pandemic this export would be badly affected.
The massive unemployment and return of migrant workers from within the
country and outside would pull down the purchasing power of the people in the
state. Thus, the aggregate demand (internal + external) would decline
significantly. The lockdown suspended almost all economic activities including
those concerning factories, construction and transport (rail, road and aviation).
There are many signals of the fall in the output in the first quarter. The total
power consumption of the country in April 2020 has declined by 22.75 per cent
as compared to that in April last year. The core sector output fell by 6.5 per cent
in March 2020 with just one week of lockdown in the country. The Gross Direct
Tax collection in April had declined by 5.4 per cent. The tax collection by the
Income Tax Department in April is the tax collected by the employers for the
income of March. Therefore, the income tax collection for the month of April
(that would be reflected in May) would show a significant decline in the direct
tax collection. This is indicated by the fact that most of the private companies
have slashed the salary of employees up to 50 per cent. Even in the public
sector, the Union government has frozen the Dearness Allowances for one year.
Many state governments have slashed the salary of government employees. The
GST collection of states has declined by more than 75 per cent. The Union
government has deferred the release of the GST collection data for the month of
April. Further, the CMIE data shows that the unemployment rate in the first

45
week of May has gone up to 23.8 percent. Most of the metros in India have
come under the red zones, where more than one third of the total output is
produced. Due to the massive movement of migrant workers, the number of
districts coming under red zones have increased by the day. In this context, it
would be unwise to expect any normal operation of economic activities soon.
The exponential growth of number of COVID-19 positive cases after the return
of migrant workers from other states also indicates that the restrictions may
continue in different parts of the state. As per the information provided by the
Government of Odisha, as on May 16, around 15 lakh people from Odisha
stranded in other states had already registered to return to their native places. On
this date 1,33,245 people had already returned to the state. Out of this, more
than 55000 workers had returned to Ganjam district alone, mostly from Surat,
Gujarat. On May 16 alone, a total of 17855 people had returned to the state.
Twenty lakh migrant workers implies approximately those many families in
Odisha are going to be affected due to loss of employment and income. With a
very conservative estimate, if we assume that all these migrant workers used to
send remittances of minimum ₹ 10000 (average of both migrants working
abroad and in other Indian states) per month, then remittances worth ₹1500
crore would stop flowing to the state every month; or, in a year ₹18000 crore
(which amounts to 3.7 per cent of the GSDP or 12 per cent of the state’s total
budget). Stoppage of flow of this remittance would drastically reduce the
demand in the local economy and, hence, slow down growth of the economy.
All these signal a drastic fall in the total output and income in the country
during the first quarter of 2020-21. Therefore, we strongly presume that instead
of any growth the Indian economy would witness a slump in the total output.

46
A Policy Framework for Economic Revival

Going by the intensity, amplitude and impact of the current pandemic (called
now as the ‘Great Lockdown’ or the ‘Great Covid Crisis’) it has been compared
by informed observers to similar catastrophic events in the global history - the
Great Depression of the 1930s and the Great Recession of 2008. In the past, for
such economic disasters causes had to be discovered and there emerged several
theories, and to some extent that delayed managing and resolving the crises. In
case of the COVID-19 pandemic the core of the crisis is identified as an
unprecedented public health emergency, and the consequences have been severe
damage to well-being, employment and income across nations. Longterm
solution depends on how and when we come out of the emergency with a
vaccine, available over the counter (OTC) everywhere that restrains COVID19
as any other flu. It is now clear that this is not going to be very soon or even in
the near future. Meanwhile, we will have to build a socially-distanced, mask-
wearing economy wherein people are employed to produce output from the
existing capacity and they are given sufficient income to consume the same
output. The principles we know from macroeconomics are clear. It is the fiscal
policy that should come to the rescue. Monetary policy should support and
become conducive, rather than take the lead. Secondly, the crisis should be
appreciated as a true unprecedented uncertainty, warranting principles of
‘uncertainty management’, rather than ‘risk management’. No insurance
company could have saved us, and people and economies just do not have a
coping mechanism. It is a novel phenomenon and we are all taken by surprise.
The response, therefore, should be that of a massive compensation to the poor
and job losers for the loss of their income and employment, and widespread
bailout of the enterprises, particularly the MSMEs, both in the public and
private sectors, in Odisha and elsewhere. However, those should not reduce our
abilities now and act as roadblocks on our path of restoring the economy and

47
rebuilding the trust and confidence of people with socioeconomic institutions.
Once we stand confidently with good health and income in the near term, we
can always bend to apply balms on the wounds. Scars are, of course, permanent
and will ever remain, and the economy will never be the same again. The
responses should have different time horizons. The short-term measures should
be able to restore the economy. In the medium-term we must repair and in the
long-run we must revitalize the economy of Odisha. It should be noted that the
fiscal and monetary policy response of a State is different from that of a country
in a federal set-up. Near-term response As the responsive and well-prepared
state government has recognized it early on, the crucial policy issue would be to
develop mechanisms to accelerate provision of basic healthcare services to these
workers and also carrying out necessary tests to rule out infections due COVID-
19. Health concerns would have to take precedence over employment and
income generation approaches by the State. The Government of Odisha should
first prevail upon the Union government to convene a virtual meeting of the
Union Finance Minister and RBI Governor with the CMs and State Finance
Ministers. Odisha should demand and the central authorities should permit a
higher fiscal deficit target. In other words, we may miss the targets for some
years. Odisha should be permitted to borrow liberally from the RBI. The State
should have permission to arrange/negotiate for loan/ aid from international
agencies. There should be clear delineation of activities, schemes and bailouts
of the centre and the states, and all overlapping spending should be carefully
avoided. Odisha should also examine the possibility of increasing State taxes
(like State Excise) right from the current year depending on the elasticity and
strength of the tax bases. In any case, the value of the money saved by not
paying the taxes will automatically be lost in due course to inflation, which is
hidden taxation. The money borrowed and resources mobilised should be
liberally spent to compensate at least 70 per cent of loss of income of
wageearners, farmers, small businesses, self-help groups and self-employed

48
people in the next three months. The delivery of these compensations through
quick-response schemes/packages should be the next most important activity of
the district administrations. If necessary, some quick surveys may be undertaken
within a fortnight. Medium-term measures The Government of Odisha should
demand COVID-19 Surcharges on income tax, mineral royalty and railway
transportation of minerals for the next five years The 15th Finance Commission
should be urged to examine and appreciate the efforts and requirements of the
different states. It is important to maintain and promote the emergency health
infrastructure created to deal with COVID-19. Long-term vision This is not the
appropriate time to plan for a long-term future of the postCOVID-19 society of
Odisha. However, it is difficult to avoid some reflection on the long-term
vision. Health, education, people’s security through policing, environment and
other social sectors are issues of primary focus of a modern welfare state. The
future political attention of Odisha should be on these deserving sectors. As per
the NITI Aayog Sustainable Development Goals (SDG) India Index Baseline
report [21], 32.59 per cent of population in Odisha is below the poverty line as
against the national average of 21.92 per cent. The COVID19 pandemic has
accentuated the economic crisis in the State where a large segment of its
population has been deprived of employment and income opportunities and
have exhausted their savings. The Scheduled Tribe population constitutes about
23 per cent of the total population of Odisha and they have been marginalized
and poor. They have been deprived of or have limited access to their vital
source of livelihood, namely, the land, forests and common property resources
(CPR).It is suggested that ownership and control of land by the rural poor is
indispensable not only for enhancing their livelihood, food security and social
status, but also for improving access to credit markets and security. The
Government needs to ensure effective implementation and strict enforcement of
land reform measures of re-distributing the surplus lands among the landless
tribes. This would encourage local tribes to pursue various natural resource-

49
based activities as livelihood pursuits. Consequent upon job losses and a
complete shutdown of economic activities, it is essential to provide for food
supply and basic necessities for survival and ensure cash transfers to the
vulnerable poor, tribes, migrants, landless manual workers. The most important
driving force of an economy is to generate aggregate effective demand of non-
food items so as to generate productive activities in industries and services
sector. Expeditious implementation of the PM-JAY or Ayushman Bharat
scheme, claiming of speedy release of the pending Goods and Services Tax
(GST) to Odisha, assisting the underprivileged self-employed to kick-start their
enterprises and (ii) reviving MSMEs, hospitality, transport and other industries
soon will go a long way to mitigate the adverse effects of the pandemic. The
Government of Odisha -- recognized at the international arena for its distinctive
crisis management -- has moved ahead with investment plans to generate
employment with maximum linkage effects. A total of six investment proposals
amounting to ₹ 9,100 crore were cleared by the Government of Odisha to bring
the battered economy back on track amid the COVID-19 pandemic which is
expected provide employment to over 6,500 people in the state having its
multiplier effects on employment and income too. As we were pushed into the
crisis, it was ‘life’ that took a priority and rightly so. But after three months it is
equally important to reconstruct and revive livelihoods to sustain lives, while
not ignoring the health issues. The governments step to rev up the health care
issues and ensure that all rural households and all households from urban slums
will be visited by ASHA workers and ANM workers from 16 June to 31 July
2020 is a welcome step in the direction. And simultaneously efforts to kick start
the economy must be prioritized.

50
Conclusion

The entire world is in the grip of vicious corona virus. The pandemic outbreak
has sparked a global health emergency along with social and economic crisis
unleashing unprecedented collapse of the economic activities and business
operations, It has severe repercussions on the global business world. Therefore,
this study has put forward the potential effects of corona virus on the different
sectors of Indian Economy. This is high time to reset everything as the world
has become standstill for a few months due to the outbreak of Covid-19. We all
are allowed to rethink, redesign, and restructure everything. If we involve in
doing the right things, we may be able to fix challenges in new platforms that
can face and bear humankind’s environmental damage, may be it pollution, self-
centered growth or inequality, or concentration of economic power and wealth.

The Government of Odisha has been successful in controlling the spread of

COVID-19 in the state by taking various proactive policy measures. Since the
last week of April, with the return of migrant workers, the number of confirmed
cases of COVID-19 has spiked in the state. However, most of these cases have
been found in the quarantine centers. The State is gradually moving towards
community spread of the virus. At this stage the Sarpanch and elected
representatives of ULBs can play a very important role in educating the local
people. The State is gradually opening up the economy to save livelihoods and
generate income for its citizens. The government has announced a slew of
packages for the returnee-migrant workers, farmers and wage earners in urban
areas. However, this will not be sufficient to revive the economy and generate
employment opportunities for the unemployed youth. The State Government
should design special policy measures to create employment opportunities for
the semi-skilled and skilled youths by setting up rural enterprises in every
Panchayat and ULB. The COVID-19 crisis has exposed the limited capacity of
the healthcare infrastructure in the State, which needs to at least double the

51
spending in the health sector. Every district of Odisha should have a medical
college with sufficient manpower and adequate infrastructure. Recent times
have shown that virus generated pandemics are affecting the humanity with
alarming frequency. Hence testing facilities must be made available at least at
CHCs to help control and contain the situation. The education system of the
state is not equipped to face the challenges of the digital and knowledge
economy. All schools, colleges and universities need to be equipped with IT
infrastructure for online learning. All teachers from schools, colleges and
universities need to be trained to generate online study materials. For reopening
schools and colleges, the State needs to move with caution. Most of the
educational institutions in several advanced countries have announced their
closure till the end of 2020. Given the fact that the number of positive cases are
spiking in the State and will continue for some more time, there should not be
any hurry to reopen schools, colleges and universities.

The state government can start classes through TV channels and radios which
can reach maximum number of students. For the effective management of the
COVID-19 crisis decentralized efforts are needed. All the PRIs and ULBs of the
state need to be empowered with more funds, functions and functionaries. In
line with the NDRF and SDRF, all PRIs and ULBs should have a disaster relief
fund for swiftly responding to the disasters. Due to lockdown, the global GDP
and the GDP of India is set to contract. Many agencies have also warned for a
double digit contraction in India’s GDP. Odisha’s GSDP may also contract
between 13 to 16 percent during 2020-21. Agriculture and allied activities and
mining activities would be the savior for the State during 2020-21. Therefore,
the State Government needs to provide all inputs free of cost for the kharif
season. Due to the lockdown, the revenue collection of the State may decline, so
also the transfer of funds from the Union Government under share taxes to the
tune of `11313 crore. While at the same time the State cannot contract the

52
expenditures because the economy has to be revived. Some amount of capital
expenditure can be shifted towards health sectors. The State Government may
consider not starting new schemes and, instead, redirect those funds towards
providing income and livelihood support. In this context, if the State aims to
spend at least the amount proposed in the budget, it needs to increase the
borrowing limit to between 6 and 8 per cent of the GSDP. Therefore, the state
needs to submit a memorandum to the Union Government and the 15th Finance
Commission to relax the FRBM limits for at least two years We think the most
significant point is that we must ensure and make the best of efforts that this
black phase of life should never happen with all of us again. I am sure that
humankind has never taken lassos and wisdom from history. Let’s hope for the
better, healthy, safe, prosperous, and of course, sustainable future ahead.

53
Reference

[1] https://indianexpress.com/article/explained/explain ed-how-has-covid-19-

affected- the global-economy6410494/(accessed May 20, 2020).

[2] https://www.indiatoday.in/magazine/the-bigstory/story/20200323-an-
economic coronary1654645-2020-03-13. (accessed May 20, 2020).

[3]https://economictimes.indiatimes.com/news/economy/indicators/coronavirus-
moodys-cuts-indiagrowthforcast-to-5-3for-2020-on-damnpeneddomestic.
(accessed May 20, 2020).

[4] IMF. World Economic Outlook, April 2020: The Great Lockdown, 2020.
https://www.imf.org/en/Publications/WEO/Issues /2020/04/14/weo-april2020
(accessed May 10, 2020).

[5] The Economic Times. ADB expects India GDP to slip to 4 pc in 2020-21;
projects strong recovery next Fiscal, 2020 (accessed May 10, 2020).

[6] The Economic Times. Lockdown pulls down power consumption by 22.75%
to 85.05 bu in April, 2020 (accessed May 10, 2020)

[7] CMIE. Unemployment Rate in India. 2020.

https://unemploymentinindia.cmie.com/. (accessed on June 13, 2020).

54