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Nano Businesses
Context:
Government data from 2015 identified over 63 million MSMEs, with more than 60 million classified as micro-enterprises. But within these micro-enterprises, how many would qualify as ‘nano’ businesses?
More on News:
- The 2023 Annual Survey of Unincorporated Sector Enterprises (ASUSE) reports a total of 65 million unincorporated enterprises, 55.3 million of which are ‘own account enterprises’ (OAEs) and 9.7 million are ‘hired worker enterprises’ (HWEs).
- Importantly, the data shows that 95% of Indian MSMEs are unincorporated.
Nano Businesses:
- According to ASUSE, unincorporated enterprises are primarily sole proprietorships, often home-based or operating from temporary locations.
- These entrepreneurs work long hours with limited access to credit.
- Only 6.4% have audited accounts, and just over 36% are registered under some authority.
- Nano businesses contribute to employment, with an estimated 110 million people working in these enterprises. Their outstanding loans average around ₹50,000.
Challenges:
- Nano businesses remain mostly informal, rely heavily on cash transactions, and are generally not registered under the Goods and Services Tax (GST) system.
- Scant data has limited policymakers’ understanding of the challenges they face, making it difficult for these businesses to scale up.
- Despite growing demand, formal financing for these businesses remains scarce.
- Most rely on personal savings or financial support from family and friends, operating with minimal paperwork and facing challenges in accessing loans due to lack of financial records or collateral.
Way Forward:
- Nano businesses should not be grouped with other MSMEs, as they have distinct needs and challenges.
- Credit estimates suggest that nano entrepreneurs could collectively require ₹3.25 trillion in credit, making them a substantial segment within MSMEs.
- While new financial tools like the account aggregator network and the Unified Lending Interface may help assess creditworthiness, the government needs to classify nano businesses as a separate group for targeted policy intervention.
- To fully unlock their potential for inclusive growth, a comprehensive approach is needed.
- This would include financial inclusion, skill development, technology adoption, and regulatory simplification.
- If coordination between the Ministry of MSMEs and the Department for Promotion of Industry and Internal Trade proves challenging, perhaps the creation of a separate ministry for nano businesses is necessary.
Micro, Small, and Medium Enterprises (MSMEs)
Overview
- Contribution to GDP: MSMEs contribute approximately 30% to India’s Gross Domestic Product (GDP) and account for about 49% of total exports from the country.
- Employment: The sector provides employment to around 11 crore people, making it a vital source of livelihood.
- Number of Enterprises: As of March 2024, there are approximately 6.3 crore registered MSMEs in India, with projections suggesting growth to around 7.5 crore in the coming years.
Government Schemes
- Credit Guarantee Scheme: The government has implemented various schemes to support MSMEs, including the Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE), which facilitates easier access to credit.
- Pradhan Mantri Mudra Yojana (PMMY): In FY24, over Rs. 5.41 lakh crore was sanctioned under Mudra loans to non-corporate and non-farm MSEs, supporting their growth and sustainability.
- Budget Allocations: The interim budget for 2024-25 allocated Rs. 22,137.95 crores for MSMEs, focusing on new clusters and technology centres to enhance global competitiveness.
- Digital Registration: The Udyam Registration portal allows for a seamless, paperless registration process for MSMEs, promoting formalisation within the sector.