What are MSMEs?
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economic structure. MSMEs classification is based on their investment in plant and machinery (for manufacturing industries) or equipment (for service industries).
According to the MSME Development Act of 2006,
A micro-enterprise is one where the investment doesn’t exceed INR 1 Crore (for manufacturing) or INR 50 Lakhs (for services).
Small enterprises involve investment between INR 1 Crore and INR 10 Crores (for manufacturing) or between INR 50 Lakhs and INR 5 Crores (for services).
Medium enterprises have investments ranging from INR 10 Crores to INR 50 Crores (for manufacturing) or between INR 5 Crores and INR 25 Crores (for services).
MSME Redefined
These numbers, however, change based on a proposal to redefine MSMEs by an amendment bill of 2018. Based on the annual turnover, they were further classified as manufacturing or service-providing industry.
Here is the classification of industry or enterprises into micro, small, and medium enterprises (in Indian Rupees)
| Kind of enterprises | Act of 2006 | Amendment Bill of 2018 | |
| Manufacturing | Services | All enterprises | |
| Investment in plant & machinery | Investment in equipment | Annual Turnover | |
| Micro | 25 lakh | 10 lakhs | 5 Cr |
| Small | 25 lakhs to 5 Cr | 10 lakhs to 2 Cr | 5 Cr to 75 Cr |
| Medium | 5 Cr to 10 Cr | 2 Cr to 5 Cr | 75 Cr to 250 Cr |
MSMEs are everywhere in India. They are in our cities, towns, and even remote villages, producing a wide variety of goods and offering a vast number of services. These businesses range from handlooms, handicrafts, and food-processing units to IT firms, providing livelihoods to millions across the country.
Benefits of MSMEs
MSMEs offer many benefits that significantly contribute to India’s economic development. They generate substantial employment opportunities at relatively low capital costs, especially in rural areas. By promoting equitable development, they assure equitable distribution of national income and wealth.
MSMEs play a very important role in the industrialization of rural and backward areas, reducing pressure on urban areas for job opportunities. They also aid in reducing India’s problem of unemployment to a great extent. These enterprises provide a livelihood to millions, thus aiding in poverty reduction.
Further, MSMEs’ role is vital in the Indian economy as they contribute significantly to the country’s Gross Domestic Product (GDP), exports, and industrial production. They foster innovation and entrepreneurship, paving the way for new industries and markets.
Features of MSMEs
MSMEs in India display characteristics that make them unique and crucial for our economy. Their smaller size allows for adaptability, enabling them to promptly respond to market changes.
MSMEs have a low-cost production methodology, contributing significantly to the economy with less capital-intensive technology. They focus more on labour-intensive techniques, which provide jobs to both skilled and unskilled workers.
Moreover, MSMEs play a pivotal role in the development of indigenous technology. They provide a platform for nurturing innovation and entrepreneurial talent, which is critical for a country’s sustainable economic development. They significantly contribute to the supply of goods and services, ensuring balanced economic growth.
Role of MSMEs in the Indian Economy
MSMEs have an incredibly vital role in India’s economy. They contributed approximately 30% to the country’s GDP in 2019-2020, making them an essential part of our economic framework. They also account for about 49.5% of India’s total exports in the financial year of 2020-21, which showcases their significant role in foreign trade.
MSMEs help in the industrialization of rural and backward areas of the country, thus promoting balanced regional development. They significantly contribute to socio-economic development by generating employment at comparatively lower capital costs than large industries.
Importance of MSMEs for the Indian Economy
The importance of MSMEs for the Indian economy cannot be understated. They are the engine that drives economic growth and development, stimulating private ownership and entrepreneurial skills. They play a pivotal role in promoting economic stability and growth by providing employment opportunities and producing a diverse range of products.
MSMEs are crucial for the Indian economy as they help increase the country’s overall production. They create employment opportunities and help in industrialization in rural areas, promoting regional balance.
Moreover, MSMEs play a significant role in India’s export performance. By promoting direct and indirect exports, they ensure the country’s entry into new and emerging markets, boosting foreign exchange earnings and improving the balance of payments.
Impact of MSME is Huge On India’s Economy, And You Can Be Part Of It
The impact of MSMEs on India’s economy is profound. Their role in economic development, job creation, and export promotion makes them indispensable. They are the unsung heroes of India’s economic story, tirelessly working towards an inclusive and prosperous future.
In a city like Patna, for people planning to start their small enterprise, MSME is the best class to be in. Get proper advice from the Chartered Accountant before incorporating your business.
Further, if you have a business plan in place and you need assistance in MSME registration, a chartered account can be of great assistance and value for you. So start building your business and make the great city of Patna flourish by adding value to it.
