Topic 02 of 6 ยท Chapter 04 ยท Indian Economy
MSME โ Definition, Importance & Government Schemes
New MSME definition (2020), importance in employment and exports, MUDRA, Udyam registration, and key schemes.
๐ In This Article
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 โน1 crore | Up to โน5 crore |
| Small | Up to โน10 crore | Up to โน50 crore |
| Medium | Up to โน50 crore | Up to โน250 crore |
โญ 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 โ 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
โ
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 โน10 lakh to micro enterprises. Three categories: Shishu (up to โน50,000), Kishore (โน50,000-5 lakh), Tarun (โน5-10 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
๐ Must-Remember Facts
- MSME definition revised in June 2020
- Micro: Investment โค โน1 crore; Turnover โค โน5 crore
- Small: Investment โค โน10 crore; Turnover โค โน50 crore
- Medium: Investment โค โน50 crore; Turnover โค โน250 crore
- MSMEs contribute ~30% of GDP
- MSMEs employ ~110 million people
- MSMEs contribute ~45% of exports
- MUDRA loans: up to โน10 lakh
- MUDRA categories: Shishu, Kishore, Tarun
- Udyam Registration = online MSME registration portal