Topic 02 of 6 · Chapter 04 · Indian Economy
MSME — Definition, Importance & Government Schemes
New MSME definition (2020), importance in employment and exports, MUDRA, Udyam registration, and key schemes.
1. MSME Definition (Revised 2020)
The MSME definition was revised in June 2020 to include both manufacturing and service enterprises under a single criterion (investment + turnover):
| Category | Investment in Plant & Machinery | Annual Turnover |
|---|---|---|
| Micro | Up to ₹1 crore | Up to ₹5 crore |
| Small | Up to ₹10 crore | Up to ₹50 crore |
| Medium | Up to ₹50 crore | Up to ₹250 crore |
⭐ Key Change in 2020: Before 2020, MSMEs were classified separately for manufacturing and services. The 2020 revision created a single composite criterion (investment + turnover) applicable to both. This simplified classification and allowed more enterprises to qualify as MSMEs.
2. Importance of MSMEs in India
- Contribute ~30% of India’s GDP
- Employ ~110 million people — 2nd largest employer after agriculture
- Contribute ~45% of India’s exports
- Account for ~95% of all industrial units in India
- Promote entrepreneurship and innovation
- Provide goods and services to large industries
- Spread economic activity to rural and semi-urban areas
✅ MSMEs = Backbone of Indian Economy: MSMEs are often called the “backbone of Indian economy.” They are crucial for employment generation, especially for semi-skilled and unskilled workers. The COVID-19 pandemic severely impacted MSMEs, leading to the Atmanirbhar Bharat package.
3. Key Government Schemes for MSMEs
- MUDRA (Micro Units Development and Refinance Agency): Provides loans up to ₹10 lakh to micro enterprises. Three categories: Shishu (up to ₹50,000), Kishore (₹50,000-5 lakh), Tarun (₹5-10 lakh)
- Udyam Registration: Online registration portal for MSMEs (replaced Udyog Aadhaar)
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): Provides collateral-free loans to MSMEs
- Prime Minister’s Employment Generation Programme (PMEGP): Provides subsidy for setting up new enterprises
- Cluster Development Programme: Develops industrial clusters for MSMEs
4. Key Points for Exam
🔑 Must-Remember Facts
- MSME definition revised in June 2020
- Micro: Investment ≤ ₹1 crore; Turnover ≤ ₹5 crore
- Small: Investment ≤ ₹10 crore; Turnover ≤ ₹50 crore
- Medium: Investment ≤ ₹50 crore; Turnover ≤ ₹250 crore
- MSMEs contribute ~30% of GDP
- MSMEs employ ~110 million people
- MSMEs contribute ~45% of exports
- MUDRA loans: up to ₹10 lakh
- MUDRA categories: Shishu, Kishore, Tarun
- Udyam Registration = online MSME registration portal