Country’s First MSME Economy Monitor Index Based On GST Sales Data Launched

The Small Industries Development Bank of India (SIDBI), in collaboration with Jocata, a financial advisory and technology firm, introduced an MSME Economic Activity Index called ‘Sumpoorn’. The index, based on consent-led and anonymized monthly sales data from over 50,000 MSMEs seeking credit, will utilize official GSTN returns from October 2019 to the present, deviating from traditional survey-based methods.

In contrast to existing macro indices relying on opinions, Sumpoorn aims to provide a more comprehensive understanding of changes in MSME sales activity. The lack of sufficient data on the MSME sector poses a hurdle for both industry stakeholders and policymakers. SIDBI's Chairman & Managing Director, Sivasubramanian Ramann, highlighted the credibility derived from authentic GST data, expressing optimism about the index's value in reflecting prevailing MSME trends.

Index’s Objective

According to Jocata, the accuracy of the index was monitored by credit experts, data scientists, and senior economists for over four years. Prashant Muddu, Managing Director & CEO at Jocata, emphasized Sumpoorn's role in addressing the MSME knowledge gap, aiding financial institutions, policymakers, economists, and researchers in formulating strategies for sustainable MSME growth nationwide.

Small companies constitute a significant portion of the Indian economy, with 96 per cent of industrial units falling under this category. Despite their size, these companies contribute substantially, making up 40 per cent of the nation's industrial production and accounting for 42 per cent of all Indian exports. Beyond economic contributions, small companies play a vital role in providing opportunities in both rural and urban areas, contributing to employment growth.

Four-Week Reporting Cycle

Muddu outlined future plans to enhance insights, with sub-indices identifying growth opportunities, issuing early warnings, and guiding capital allocation to different sectors and clusters. Jocata, a BillDesk subsidiary founded in 2010, specializes in digital lending through credit automation and intelligent monitoring.

To calculate the index for a specific month, a minimum of 13 months of sales data (GSTR1) is required, involving at least 1,000 MSMEs. The company, with a current monthly MSME count of around 2,500, plans to release the index monthly with a four-week reporting cycle. The MSME sales performance will be graded on a 0 to 1 scale, indicating the state of contraction or expansion in the sector's economic activity.

In conclusion, moving ahead from conventional survey-based approaches, Sumpoorn relies on consent-driven, anonymized sales data from a substantial number of MSMEs, offering a more accurate and real-time reflection of their economic activity. Along with bridging the existing knowledge gap in the MSME sector, the index will prove to be a valuable tool for financial institutions, policymakers, economists, and researchers. The use of GST data will bring a level of credibility that was previously lacking in macro indices.