The real Indian economy is still in the hands of MSMEs, and are the backbone , real strength to bring resilience despite the economies around the world are suffering with low-stagnated growth. But who is the MSME in India ?
MSME, a word that is often mentioned every news paper, often had a vague definition.
Who is MSME ?
MSME referred to “Micro, Small, and Medium Enterprises”, it’s similar definition that most western countries anonymously use as SME.
Per Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, there are two types of enterprises in MSME based on type of activity.
- Manufacturing Enterprises – those who produce Goods
- Service Enterprises – those who render Services
The current classification of Micro, Small, Medium enterprises are mainly based on the investments made in to the enterprise.
|Type of Enterprise||Investment in Plant & Machinery|
|Micro Enterprise||<= Rs. 25 Lakhs|
|Small Enterprise||between Rs. 25 Lakhs to 5 Crores|
|Medium Enterprise||between Rs. 5 to 10 Crores|
|Type of Enterprise||Investment in Equipment|
|Micro Enterprise||<= Rs. 5 Lakhs|
|Small Enterprise||between Rs. 10 Lakhs to 2 Crore|
|Medium Enterprise||between Rs. 2 to 5 Crores|
What is the Proposed Change to MSME Definition ?
With the increased economic activity in last decade plus in India, and the share of MSME contribution to Indian GDP is around 30%, possibly way higher with the consideration of gross root economy, Union Minister Nitin Gadkari in Oct 2019 revised the definition to be more uniform across Manufacturing and Service Sectors.
Also to encourage the supporting incentives based on the revenue rather just a mere investment.
|Type of Enterprise||Turnover|
|Micro Enterprise||up to Rs. 5 Crores|
|Small Enterprise||between Rs. 5 to 75 Crores|
|Medium Enterprise||between Rs. 75 to 250 Crores|
Per above definition, > 90% of MSMEs are in Micro segment alone and which may defeat the purpose in classifying.
While the new definition is not enacted yet as on this article is published, the turnover thresholds may need a 2nd look to match with the real Indian Economy.