Unconventional metrics to find credit scoring of SMEs in India

Abstract

The Micro, Small, and Medium Enterprises (MSME) sector in encompases over 60 million businesses in the country. It is a crucial lever in driving the economic growth of the country, employing 80 million people. The MSME sector produces over 95 percent of manufacturing output in volume terms, contributing to 40 percent of export in value. Growing at 11.5 percent a year, the MSME sector has been performing better than the overall GDP which is at around 8 percent growth per annum, and the overall industrial output measured by the index of Industrial Production IIP as indicated in Fig 1. Please note that the current estimates of the MSME contribution to the GDP does not account for the contribution of both revenue and assets made by enterprises in the unorganized sector. Currently, over 90 percent of all MSMEs are unregistered, however the “formalisation” of MSMEs post demonetisation, following the rollout of GST has helped establish digital footprints for such firms.