Micro Small and Medium Enterprises (MSME) Sector

In India, the enterprises have been classified broadly into two categories:

1. Manufacturing;

2. Those engaged in providing/rendering of services.

Both categories of enterprises have been further classified into micro, small and medium enterprises based on their investment in plant and machinery (for manufacturing enterprises) or on equipments (in case of enterprises providing or rendering services).

The present ceiling on investment to be classified as micro, small or medium enterprises is as under:

[A] Manufacturing Enterprises

1.A micro enterprise, where the investment in plant and machinery does not exceed twenty five lakh rupees;

2. A small enterprise, where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; and

3. A medium enterprise, where the investment in plant and machinery is more than five crore rupees but does not exceed ten crore rupees.

[B] Service Enterprises

1.A micro enterprise, where the investment in equipment does not exceed ten lakh rupees;

2. A small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; and

3. A medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.

Micro Small and Medium Enterprises (MSME) Sector 

Worldwide, the micro small and Medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. The MSEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. In India too, the MSEs play a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39 per cent of the manufacturing output and around 33 per cent of the total exports of the country. Further, in recent years the MSME sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.

To help the MSMEs in meeting the challenges of globalization, the Government has taken several initiatives and measures in recent years. First and foremost among them is the enactment of the ‘Micro, Small and Medium Enterprises Development Act, 2006’, which aims to facilitate the promotion and development and enhance the competitiveness of MSMEs. The Act has come into force from 2nd October 2006. Other major initiatives taken by the Government are setting up of the National Manufacturing Competitiveness Council (NMCC) and the National Commission of Enterprises in the Unorganised Sector (NCEUS). Further, in recognition of the fact that delivery of credit continues to be a serious problem for MSMEs, a ‘Policy Package for Stepping up Credit to Micro, Small and Medium Enterprises (MSME)’ was announced by the Government with the objective to double the credit flow to the sector within a period of five years. The Government has also announced a comprehensive package for promotion of micro, small and enterprises, which comprises the proposals/schemes having direct impact on the promotion and development of the micro, small and enterprises, particularly in view of the fast changing economic environment, wherein to be competitive is the key of success.

Performance of Micro, Small and Medium Enterprise Sector

As per the third All–India Census held for the year 2001-02, there were 105.21 lakh enterprises (Registered and Unregistered) in the country, out of which 13.75 lakh were registered working enterprises and 91.46 lakh unregistered enterprises. Their contribution to production was Rs.2, 82,270 crore and to employment was 249.32 lakh persons. It is estimated that during 2006-07 (provisional), the number of units has increased to 128.44 lakh from 123.42 lakh in the previous year registering a growth rate of 4.1 per cent. The value of production at current prices is estimated to have increased by 17.9 per cent to Rs.5,87,196 crore from Rs.4,97,842 crore. The employment is estimated to have increased to 312.52 lakh from 299.85 lakh persons in the previous year.
The MSME sector has been registering a higher growth rate than the overall industrial sector in the past few years consistently.