Structural Interventions


Why India needs an MSE sentiment index

Effective policy making is a function of the quality of information at hand.

Because data on micro and small enterprises (MSEs) comes with a significant lag, a comprehensive and concise lead + lag indicator of ground-level sentiment becomes a crucial tool for policy makers, lenders, trade bodies, economists, rating agencies and the MSEs themselves.

Till now, there was no such barometer available in India, though indices and sentiment surveys to track large and mid-sized corporates area plenty and have been in existence for decades.

While there have been adhoc surveys by chambers of business and specific agencies as one-time efforts, a continuous survey leading to an index is a first.

Reasons why CRISIL and SIDBI decided to launch the CRISIL-SIDBI MSE Sentiment Index, or CriSidEx.

The case for CriSidEx

  • Limited representation of MSEs – which account for 90% of enterprises in India, and are the second-largest employers after agriculture – in macro and micro assessments
  • Existing business indices focus on predicting the direction of annual change of GDP but not the impact at micro level in each industry/sector
  • Policy makers unable to assess the impact of their decisions on MSEs
  • Lack of data on employment and production cycles, which can be the basis of estimation of employment and capital formation in the MSE sector
  • Significant lag in availability of financial information of MSEs restricts lenders from taking timely credit decisions. Access to formal finance remains the key challenge for MSEs
  • MSEs are unable to assess how they are faring versus peers
  • There is no sector-specific index that projects changes in sentiment and which will help MSEs take important decisions