The MSME stands for Micro, Small, and Medium Enterprises. In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, the enterprises are classified into two divisions. Manufacturing enterprises – engaged in the manufacturing or production of goods in any industry.

In a developing country such as India, the MSME industrial sector forms the backbone of the nation’s economy. When compared to large industries, MSMEs have successfully played a critical role in the generation of employment opportunities at relatively lower capital costs. In addition to this, they have reduced regional imbalances by being the crucial factor for the industrialization of rural & backward areas.

This has secured a more equitable distribution of national income and wealth. According to the annual report prepared by the Government of India (2018-19), there are close to 6,08,41,245 MSMEs in India. 

Micro, Small and Medium Enterprises Development Act
The MSME enterprises are primarily engaged in the manufacturing, production, processing, and preservation of commodities and goods. MSMEs form an important sector in the Indian economy. Their contribution to India’s socio-economic development is huge.

 The MSME Act was operational from October 02, 2006. It was established to develop, promote and facilitate the competitiveness of the micro, small and medium enterprises. The current MSME classification was based on the criteria of investment in machinery, plant, or equipment. So, to enjoy the MSME benefits, the MSMEs were constrained to limit their investment to a lower limit, than other large-scale firms.

The Government of India has introduced the definition of MSMEs in agreement with the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006. Recently, a proposal was introduced to redefine MSMEs by the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2018. This was proposed to classify them based on their annual turnover, as service-providing or manufacturing enterprises.

Features of MSMEs
MSMEs are involved in producing and manufacturing a host of products for domestic as well as international markets. They create employment opportunities for several people in the country and also work closely towards the development of the rural and backward areas. A few of the essential elements of MSMEs are listed below:

  • MSMEs provide funding support or credit limit to banks.
  • MSMEs assist the workers and artisans by providing employment and also, by offering loans and other services. Thus, they work towards their welfare.
  • MSMEs support infrastructure development, up-gradation of developmental technology, and overall modernization of the sector.
  • MSMEs promote the advance of entrepreneurship as well as up-gradation of skills by setting up specialized training centres for the same.
  • MSMEs also offer quality certification services and modern testing facilities.
  • MSMEs are proven to give reasonable assistance for better access to the domestic and export markets.
  • Following the recent trends, MSMEs now support innovation, product development, design, packaging, and intervention.

Highlights of redefined MSMEs
‘Atma Nirbhar Bharat Abhiyan’ or the ‘Self-Reliant India Scheme’ (2020) by the Government of India has redefined MSMEs further. Some of the highlighting features of the new, redefined MSMEs are as follows:

  • Approximately 45 Lakh units will be benefitted from the reclassification of MSMEs
  • MSME Loan up to Rs. 3 lac crores can be arranged
  • Collateral Free Loans is provided to MSMEs 
  • MSMEs are offered to get a Moratorium period of 12 months
  • 100% Credit Guarantee is assured
  • Manufacturing and Service MSMEs are considered as same entities
  • Repayment Tenure of 48 months is granted


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MSMEs and the Indian Economy
MSMEs play a vital role in the country’s development in different areas such as high contribution to domestic production, the requirement of low investment, mobility through the locations, low rate of imports, and flexibility in operations. It is widely accepted that MSMEs are a means of economic growth as they focus on promoting equitable development. MSMEs have driven the economy of India to new heights. 

In India, the MSME sector currently contributes to 30% of the Gross Domestic Product (GDP). The Government of India targets to increase its contribution to 50% by 2025, as India tries to move ahead to become a $5 trillion economy. The MSME sector contributes to 95% of all industrial units in India, 50% of Total Exports in the nation, and about 45% of the country’s Total Industrial Employment. Currently, it is estimated that more than 6000 types of products are produced in these industries (based on which are known as small-scale industries (or SSI). The economy of the country flourishes and grows when these industries bloom and thrive. 

Employment prospects in the MSME sector
MSMEs have become the second-largest employment generating sector next to agriculture. Since its establishment, the MSME sector has proven to be a highly dynamic segment in the Indian economy. By the provision of employment opportunities to people belonging to weaker sections of the society in rural areas, MSMEs promote all-inclusive growth. Khadi, village, and coir industries have grown and developed under this scheme, resulting in the industrialization of backward areas with a low capital cost.  

MSMEs also act as complementary units to large industrial sectors. In the urban scenario, MSMEs help in creating opportunities for people to use banking services and products in tier-2 and tier-3 cities. This could also amount to the final inclusion of the contribution of MSMEs to the nation’s economy. 

Budding entrepreneurs are provided an opportunity to focus on building innovative products, and boost competition in the business sector in domestic and international markets and thus, fuel growth of the economy. In this way, the MSME sector gives silent, but stable support to the national economy of India.  It thereby acts as a defense against global economic adversities and shock. Hence, it can be inferred that by a silent revolution propelled by MSMEs, India is moving on towards becoming a robust global economy.

Technological training in the MSME sector
MSME training centres offer both theoretical and practical training to different sections of personnel. International level programmes are included to widen opportunities all over the world. Such training facilities are built to foster fast-paced, yet effective and thorough learning. These centres are armed with training tools for quick and easy working, precise calculations, and coming up with high-end products. 

Training is provided for employers to enhance their skills and maximize productivity, in addition to the production of goods and commodities. Many centres are set up to assist the training of craftsmen for making tools and goods. The trainees are exposed to procure hands-on experience to expand their potential.

 MSME Loans
Loans support small and medium scale businesses (MSMEs) in infrastructural and development aspects by providing finance. These loans given to meet business expenses are commonly linked to financial establishments. Most of these loans are based on credit and are not secured.  The Reserve Bank of India is one of the main institutions under the Government of India that provides MSME loan schemes.

MSME loan can be availed from various other financial institutions that have a link with government schemes. This can help in increasing the benefit of the industries. To be eligible for the schemes and avail of the MSME loan interest rate, businesses are required to meet specific criteria. Some of the schemes offered by the Government of India include Prime Minister’s Employment Generation Programme (PMEGP), Micro Unit Development and Refinance Agency, also known as MUDRA Loan and Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE).

Overall, it is evident that the MSME sector has made significant contributions to the economy of India. It has helped rural India to enhance traditional skills with the infusion of modern technology. High-end training offered under the MSME sector paves the way for a bright future for Indian industries. With the loans offered in the MSME sector, the opportunities for economic growth truly are boundless. #KhabarLive #hydnews