New Delhi: Terming the MSME sector as the backbone of the economy, Finance Minister Arun Jaitley today said the sector would lead the current consolidation phase of the economy.

"Having gone through a series of very major structural reforms in the past two years, now (this) also is a phase for consolidation as far as the economy is concerned. And this phase of consolidation will also be led by the MSME sector," he said after launching CriSidEx, the first sentiment index for micro and small enterprises (MSEs).

Jaitley further said the health of the sector is extremely vital to the economy and with a number of steps taken there is an increased integration of the sector into the formal economy.

Pointing out that it is one of the largest employers, he said, "This is one sector where people not only exhibit their entrepreneurial skills, become part of large value chains but then also become job creators in the process." 

That is the reason why the bulk of the jobs in manufacturing, trading have been created in this particular sector, the finance minister added.

He also said that in a country with a vast population, the scope for employment either in government or in the large industry has a limited potential.

CriSidEx, developed jointly by CRISIL and SIDBI, is a composite index based on a diffusion index of 8 parameters, and measures MSE business sentiment on a scale of 0 (extremely negative) to 200 (extremely positive).

This objective index will be of some use to individual companies but certainly it will be of much greater use as far as policymakers are concerned so that the necessary changes can also be brought in, to ensure that the government continues to perform its role as a facilitator as far as the sector is concerned, he said.

"I see a great value in this index as much as in the series of the data, the series of sentiment, which will show, what are the challenges to that sector, what are the strength of that sector, what is the cause of optimism, where is that the shoe pinches...," he added.

Speaking on the occasion, Financial Services Secretary Rajiv Kumar said the launch of index is very timely because the government has really enabled MSME in terms of credit needs and taxation relief in the last 4-5 months.

"In respect of 'Udayamimitra', I would say it's virtual platform now and 3,300 cases have been sanctioned amounting to Rs 750 crore in the last 4-5 months," Kumar said.

The banks have been fully capitalised, their lending capacity has increased. It is really right time that this Udayamimitra online portal becomes really effective and more and more lending takes place, he said.

Similarly, on the part of Trade Receivables Discounting System (TReDS), a large number of PSU and PSBs have already come on board, he said.

"Banks are really ready to support the MSME sector and they being major employment generator and I am sure we will not fail on this aspect," he said.

Noting that it is MSME which generates most of the employment, Economic Affairs Secretary S C Garg said a lot of them talk about 6-7 crore fundamental enterprises in the country, if they get their online ID from Aadhaar as an enterprise ID that will also facilitate their process towards formalisation.

"It will also facilitate their ease of doing business.

With one single enterprise ID it is possible that 26-27 business registration will not be required. And it will be possibly much easier to file their returns," Garg said.

Talking about benefit of index SIDBI Chairman and Managing Director Mohammad Mustafa said it captures the sentiment of MSEs very well, and therefore would do two crucial things.

It would be an accurate barometer of on-the-ground trends given that not much statistical light emanates now from MSE geographies and play an important role in addressing financial and developmental gaps in the MSE ecosystem, he added.