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Lack of reliable data major impediment to MSME growth

The micro, small and medium enterprises (MSME) sector, which is considered to be the backbone of Indian economy, consists of a vast set of an estimated 6.34 crore enterprises in the country.

However a major roadblock in the growth of MSME sector is the lack of reliable data about enterprises operating in this sector.

Surprisingly, the last MSME survey was conducted by National Sample Survey Office (NSSO) in 2015-16, i.e., six years ago.

This lack of reliable data, according to sources, is a major roadblock in the growth of the MSME sector.

Considering the fact that the MSME sector itself has undergone changes in 2020 when the coronavirus pandemic had erupted and they needed urgent credit requirements, the need for a survey of the sector becomes all the more pertinent.

The government may consider conducting a survey of the MSME sector soon, sources said.

The survey would help estimate the actual number of MSMEs in the country along with realistic assessments of their credit requirements, they added.

Due to lack of regular survey, there is still a significant credit gap for the MSME sector and unmet demand remains substantial.

As per the U.K. Sinha, Expert Committee on MSMEs’ report, the overall credit gap in the MSME sector is estimated to be Rs 20 lakh crore to Rs 25 lakh crore.

Along with the credit gap, the MSME sector is often not able to borrow at globally competitive rates since there is not sufficient and affordable financing available to financial institutions that target the MSME sector.

MSME enterprises also have to contend with delayed and erratic payments from their customers, which makes working capital management and financing very difficult.

Since few MSMEs have sufficiently predictable cash flows, it becomes difficult for MSMEs to access affordable financing to operate and grow their businesses.

Therefore, regular surveys of the sector would significantly help bridge the credit gap for MSMEs in the country, industry sources said.

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