The Micro- Small and Medium Enterprises (MSMEs) are small sized entities, defined in terms of their size of investment. They are contributing significantly to output, employment export etc. in the economy. They perform a critical role in the economy by providing employment to a large number of unskilled and semi-skilled people, contributing to exports, raising manufacturing sector production and extending support to bigger industries by supplying raw material, basic goods, finished parts and components, etc.
As per the ‘MSME at a Glance’ Report of the Ministry of MSMEs, the sector consists of 36 million units and provides employment to over 80 million persons. The Sector produces more than 6,000 products contributing to about 8% of GDP besides 45% to the total manufacturing output and 40% to the exports from the country.
How MSMEs are classified?
The MSMEs are classified in terms of investment made in plant and machineries if they are operating in the manufacturing sector and investment in equipment for service sector companies.
Though the primary responsibility of promotion and development of MSMEs is of the State Governments, the center has passed an Act in 2006 to empower the sector and also has formed a Ministry (Ministry of MSMEs). It was the Micro, Small and Medium Enterprises Development (MSMED) Act which was notified in 2006 that defined the three tier of micro, small and medium enterprises and set investment limits.
Table: Classification of MSMEs
Classification of the MSME
Ceiling on Investment in Plant and Machinery (in Rs)
Below 25 lakhs
25 lakhs to 5 crores
5 crores to 10 crores
For the service sector, the investment limits are Rs 10 lakh, 2 crores and 5 crores in terms of investment made in equipment. In 2015, the government has introduced an amendment bill to enhance the investment limit in all categories.