How to get an accurate picture of India's MSME sector

We should strengthen the survey of small enterprises to dispel a data haze and frame policy better

- AJIT RANADE & KIRAN LIMAYE

Micro, small and medium enterprises (MSMEs) are the backbone of our economic structure, driving value addition, employment and exports. There are more than 70 million such enterprises, accounting for nearly 30% of India's GDP and over 40% of exports. Yet, policymakers operate with an incomplete and somewhat distorted statistical picture. We have two major sources of data on unincorporated MSMEs—those not registered as a company or a limited liability partnership. The first is the Annual Survey of Unincorporated Sector Enterprises (ASUSE) conducted by the National Sample Survey Office (NSSO). It covers non-agricultural, non-construction and unincorporated establishments. Before it became an annual exercise in 2021-22, this was conducted only in 2015-16 and 2011. The second source includes the two main administrative databases Udyam (for MSME registration) and the Goods and Services Tax Network (GSTN), which provide a count of registered units. But there is a glaring disconnect between these sources, resulting in misleading estimates of output, employment and formalization in the sector.