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.


Let us look at the various classification, features, opportunities, contributions, and financing options for MSMEs.

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

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.