What Is MSME?

MSME is classified by the Government of India under the Micro, Small and Medium Enterprises Development (MSMED) Act 2006. They are small and medium business entities engaged in several business processes like manufacturing, production, maintenance, preservation, and retail of various products and services.

MSMEs are widely touted as the backbone of the Indian economy. Presently, it contributes to about 8% of the current GDP and accounts for about 45% of the manufacturing output. MSMEs also generate a considerable number of jobs in the country and work towards developing the country’s rural areas.

Classification Of MSME

An MSME Amendment Bill passed in 2018 proposed to classify MSMEs based on their annual turnover. Therefore, the classification now stands as follows:

Enterprise Type	Manufacturing Sector (as per 2016 bill)	Service sector (as per 2016 bill)	Annual Turn Over (after 2018 amendment)
Micro	Rs. 25 lakhs	Rs. 10 lakhs	Rs. 5 crores
Small	Rs. 25 lakhs to 5 crores	Rs. 10 lakhs to 2 crores	Rs. 5 to 7 crores
Medium	Rs. 5 crores to 10 crores	INR 2 crore to 5 crores	Rs. 75 crores to 250 crores

Features Of MSME

The following sections enlist some important features of MSME.

The MSMEs work for the growth and welfare of small-scale workers and artisans, creating scope for employment.
Promotes entrepreneurship and skill upgrades with specialised training.
MSMEs also offer support in infrastructure development, technological upgradation, and modernisation.
The MSME sector extends comprehensive support to improve exports as well as domestic markets.
MSMEs develop and provide adequate testing facilities and necessary certifications to promote product development.

Opportunities In MSMEs

The opportunities in the MSME sector is massive and ever-growing due to several lucrative factors like:

Convenient procurement of machinery and raw materials
Advanced tool & testing support
Growing demand in the domestic market
Comprehensive support from the Government via various subsidies and policies
End-to-end workforce training
Favourable export promotions and increasing global demands for Indian products

Various Financing Options Available For MSMEs

MSME businesses in India are eligible to access various financing options to manage their working capital and cash flow crisis like business loans, invoice discounting, lease rental discounting, and more. Moreover, in contemporary times, fintech companies also extend various hassle-free funding options like revenue-based discounting.

KredX offers personalised, secured, and unsecured financing solutions for MSMEs to maintain a steady cash flow and achieve optimal growth.

Contribution Of MSME At Current Prices

Contribution of MSME at current market prices as per Central Statistics Office CSO.

Year	MSME Addition of Gross-value	% of Growth	Total Gross-value addition	MSME Share in GVA (%)	Total GDP	Share of MSME in GDP (%)
2011-12	2622574	_	8106946	32.35	8736329	30
2012-2013	3020528	15.17	9202692	32.82	9944013	30.40
2013-2014	3389922	12.23	10363153	32.71	11233522	30.20
2014-2015	3704956	9.29	11504279	32.21	12467959	29.70
2015-2016	4025595	8.65	12566646	32.03	13764037	29.20
2016-2017	4405753	9.44	13841591	31.83	15253714	28.90

Importance Of MSME

MSMEs in India generate employment for about 120 million people, becoming the second largest employment generating sector, the first being agriculture.
MSMEs contribute about 6.11% to GDP from its manufacturing sector and approximately 24.63% from the service sector.
MSME contributes about 45% to the overall export volume in India.
MSME Ministry of India currently targets to increase the contribution of the sector to GDP by 50% within 2025.

Therefore, as deduced from this run-down, the Indian MSME sector is salient support to the country’s economic activities and offers a competitive edge among other economies worldwide. Moreover, the MSME sector is taking the Indian economy to new heights by generating jobs and creating a favourable environment for low investment, flexibility in operation, and more.

Frequently Asked Questions

Q. What is MSME online registration, and who can apply?

A. MSME registration in India is free and paperless. Entrepreneurs can apply for online registration on the Udyog Aadhaar Memorandum portal. Any entrepreneur who has a valid Aadhaar number can register their MSME online.

Q. What is the importance of credit rating in MSME?

A. Credit rating is important in the MSME sector to facilitate credit flow and offer comfort to financial institutions like banks, NBFCs, or fintech companies. Various agencies assign credit ratings to MSMEs, allowing financial institutions to analyse their credit history and reduce associated risks.

Q. Does KredX offer invoice discounting to MSMEs?

A. Yes, KredX offers the invoice discounting facility to MSMEs to help them meet working capital requirements. It’s a 100% paperless process. Applicants can obtain funds within 72 hours* of application.