Nano businesses in India need special policy attention to flourish

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Subscribe to enjoy similar stories. Are we looking at the Indian micro, small and medium enterprise (MSME) sector through the wrong lens? According to government data, there were over 63 million MSMEs in 2015, of which over 60 million were micro enterprises. Of these micro enterprises, though, how many would be ‘nano’ businesses? The Annual Survey of Unincorporated Sector Enterprises (ASUSE) for 2023 offers a contemporary indication.

It puts the total number of unincorporated enterprises at 65 million, of which 55.3 million are ‘own account enterprises’ (OAEs) and 9.7 million are ‘hired worker enterprises’ (HWEs). The survey data indicates that 95% of Indian MSMEs are not incorporated. The term ‘business’ means something very different to this cohort, and so improving their ease of doing business demands a dedicated approach.

Unfortunately, policy biases and misconceptions seem to have resulted in this large group of entrepreneurs going underserved, perhaps even ignored. So what characterizes nano businesses? According to the ASUSE survey, unincorporated enterprises are mostly sole proprietorships operating from their homes or from temporary work places. They work long hours and have marginal access to credit.

Only 6.4% have audited accounts, but a little over 36% have registered themselves under some authority or Act; 7% have contributed to manufacturing and other services through contractual work. They employ as many as 110 million people and their outstanding loans average around ₹50,000. Nano businesses represent a large chunk of India’s employment base.