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What is the New definition of Micro, Small and Medium Enterprises?

28-FEB-2018 02:29
    New Definition of MSMEs

    The Micro, Small and Medium Enterprises (MSMEs) sector has emerged as a highly vibrant and dynamic sector in the Indian economy over the last five decades. MSME sector had saved India's economy from great recession in 2008 and still contributing like the backbone of the economy.

    As per MSME Act-2006, The MSMEs are classified into two categories;

    1. Manufacturing Enterprises-The enterprises engaged in the manufacture or production of goods (as per Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use.

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

    In the month of February, 2018, the Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved change in the definition of the MSMEs.

     Now MSMEs will be defined on the basis of ‘annual turnover’ instead of investment in plant & machinery/equipment.

    Now let us know the new definition of the MSMEs in India;

    Manufacturing Sector

        Enterprises

     

        Micro Enterprises

     Annual turnover is less than Rs.5 cr.

        Small Enterprises

     Annual turnover is between Rs. 5 Cr to Rs. 75 cr.

        Medium Enterprises

     Annual turnover is between Rs. 75 Cr to Rs. 250 cr.

    Service Sector

        Enterprises

     

        Micro Enterprises

     Annual turnover is less than Rs.5 cr.

        Small Enterprises

     Annual turnover is between Rs. 5 Cr to Rs. 75 cr.

        Medium Enterprises

     Annual turnover is between Rs. 75 Cr to Rs. 250 cr.

    Contribution of the Micro, Small and Medium Enterprises in the Indian economy is as follows;

    1. At present, approximately 36.1 million units of Micro, Small and Medium Enterprises are engaged in production in India.

    2. MSMEs provide employment to around 120 million people in India.

    3. MSMEs are responsible for 45% share of India's total export.

    4. MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.

    5. The MSME sector has consistently growing at the average rate of 10% annually.

    6. The contribution of this sector to the country's Gross Domestic Product is about 8%.

    7. A study done by the Confederation of Indian Industries (CII) on the Indian MSMEs reveals that the MSME's contribution will be around 50% in the India's GDP by 2024.

    8. Many units of MSMEs are located in rural areas, which are checking the migration from rural areas to urban areas.

    I am hopeful that the changes made in the definition of the MSMEs will enhance the ease of doing business and very soon the contribution of manufacturing sector in the Indian GDP will touch to 25 percent.

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