What IS Micro, Small And Medium Scale Enterprises in India?

Written By: Archana
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    Indian economy is on the path of steady growth. The manufacturing industry holds an important key position in Indian economy. It contributes to the gross domestic product of the country. It also offers employment opportunities for the countrymen.

    India has made significant progress across various areas of science and technology, and we now take pride in having a secure network of trained human resources, an innovative knowledge. The current status of technology, development initiatives were made by the government, and its impact in future has propelled Indian Manufacturing Industry to achieve high growth rates.

    What is Micro, Small and Medium Scale Enterprises?

    As per the provision of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 - the Micro, Small and Medium Enterprises (MSME) are classified into two categories namely.

    1. Manufacturing Enterprises -
    The enterprises engaged in manufacture or production of goods relating to any industry specified in the first schedule to the industries (Development and Regulation) Act of 1951).
    Employing plant and machinery in the process of value addition to the final product having a distinct name or character or use.

    The manufacturing enterprise is defined in terms of investment in plant and machinery.

    2. Service Enterprises -
    Enterprises engaged in providing or rendering of services are defined in terms of investment in equipment.


    Classification Of Micro, Small And Medium Scale Enterprises

    Enterprises can take the form of company or proprietorship or co-operative or association of persons or Hindu Undivided Family or Partnership etc. The definition is not limited to the number of people employed by the firm nor the electricity consumed as was the case in the past.

    The micro, small and medium enterprises are categorized based on the investment in plant and machinery, as mentioned below:

    Manufacturing Sector 
    Enterprises Investment in plant and machinery
    Micro Enterprises Does not exceed rupees 25 lakh
    Small Enterprises More than rupees 25 lakh but does not exceed rupees 5 crore
    Medium Enterprises More than rupees 5 crores but does not exceed rupees 10 crore
    Service Sector  
    Enterprises Investment in equipment
    Micro Enterprises Does not exceed rupees 10 lakh
    Small Enterprises More than rupees 10 lakh but does not exceed rupees 2 crore
    Medium Enterprises More than rupees 2 crores but does not exceed rupees 5 crore


    Industry Groups

    There are significant industry groups in small scale sector in India, ranging from food products, metal products, rubber and plastic products, hosiery and garments - wood products, paper products and printing, leather and leather products, transport equipment and parts, cotton textiles and so on to name a few.

    The small scale sector in India has emerged as a significant supplier for items like plastic and rubber goods, leather and leather goods, domestic utensils, stationery items - soaps and detergents, toothpaste and powder, preserved foods and vegetables, safety matches and so on.


    Schemes For MSMEs

    The Government of India has taken several initiatives for promoting, development and revival of micro, small and medium enterprises in the country. To support the production of goods and services in India, the government provides various assistance to the MSMEs; the government has introduced several schemes like:


    • Prime Minister Employment Generation Programme and Other Credit Support Schemes
    • Development of Khadi, Village and Coir Industries
    • Technology Upgradation and Quality Certification 
    • Marketing Promotion Schemes
    • Entrepreneurship and Skill Development Programme
    • Infrastructure Development Programme


    In 2015-2016, the implementation of many reforms helped the MSMEs to flourish. These include re-implementation of Public Procurement Policy, Pradhan Mantri MUDRA Yojana, Make in India, Startup India, and Skill India.


    Role of MSMEs in Indian Economy

    MSMEs employ 40% of India's workforce, which is estimated to be around 80 million people, which give an opportunity for employment and livelihood through low skilled jobs. Approximately 1.3 million MSMEs contribute to 45 percent of manufacturing output in India and 40 percent of total export. India has a second largest number of MSMEs in the world, next to China.

    MSMEs contribute to about 17 percent of GDP in India. If this sector is provided the right support, it has the potential to spread the industrial growth throughout the country. The government is aimed to increase the growth of manufacturing sector by 12 percent to 14 percent per annum and to increase its share of GDP to 25 percent by 2025. The introduction of GST Bill will help eradicate indirect taxes, brings in more transparency of tax process which will significantly improve MSMEs.

    The introduction of several policies along with technology and innovation will continue to play an essential role in creating a business-friendly atmosphere for MSMEs.


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