New Definition of MSME

• Finance Minister announced the new definition of MSME (Medium, Small and Micro Enterprises).
• The change has been brought in to effect to help small and medium industries prosper and get benefited.
• Finance Minister in her press release also added that this change is in favor of the MSME’s.

What is MSME?

• Economic activities in India are divided into three main sectors namely, the Primary sector, Secondary Sector, and Tertiary Sector.
• Primary sector comprises of all those activities which are done by directly using natural resources like, Agriculture, Fishing, Mining, Forestry, Dairy and etc.
• It is a very important sector in India as it provides daily bread to most of India’s population. It constitutes around 50% of the workforce and adds 17% to the GDP of India.
• Secondary sector includes all those activities which are undertaken with the help of raw materials produced under the primary sector.
• These raw materials are turned into finished goods and products in the manufacturing plants. Examples of the secondary sector are Food Processing, Oil refining, Energy Production and etc. Its contribution is around 29.6 % of the GDP of India.
• Tertiary sector is the third sector in the Indian economy also known as the service sector. It is built upon the primary sector and secondary sector. Currently, the service sector is the backbone of the Indian economy and contributes 54.3% to the GDP.

Key differences between the existing and revised definition of MSME

• All the industry be it of any sector can avail benefits issued by the government provided they are eligible for it. Criteria for listing under MSME are defined based on their scale of investment.
• As per the scale of the investment companies are listed as Micro, Small, or Medium Industries. Now let us see the eligibility criteria for both old and new forms one by one.

According to the existing norm,

• Micro:
o Manufacturing Industries – Investment should be less than 25 Lakh.
o Service Industries – Investment should be less than 10 Lakh.

• Small:
o Manufacturing Industries – Investment should be greater than 25 Lakh and less than 5 Crore.
o Service Industries – Investment should be greater than 10 Lakh and less than 2 Crore.

• Medium:
o Manufacturing Industries – Investment should be greater than 5 Crore and less than 10 Crore.
o Service Industries – Investment should be greater than 2 Crore and less than 5 Crore.

In the old definition only Investment in plant & machinery or equipment are taken into account.

Revised MSME norm,

In the revised definition, both the manufacturing and the service sector are grouped together.

• Micro:
o Manufacturing & Service Industries – Investment should be less than 1 Crore and Turnover should be less than 5 Crore.

• Small:
o Manufacturing & Service Industries – Investment should be greater than 1 Crore and less than 10 Crore. Whereas, Turnover should be greater than 5 Crore and less than 50 Crore.

• Medium:
o Manufacturing & Service Industries – Investment should be greater than 10 Crore and less than 20 Crore. Whereas, Turnover should be greater than 50 Crore and less than 100 Crore.

In the new definition Investment and annual turnover are taken into account.