What is the new definition of MSMEs?

Vivek Punj | May 13, 2020 | Business Today

Centre has revised the definition of micro, small and medium enterprises to give them the confidence to grow. Under the new definition, the distinction between manufacturing and services enterprises has been eliminated. Under the new definition of MSMEs, the investment criteria for such enterprises have been revised upwards, while an additional criterion of turnover has been introduced.

“There always was this fear, in very successful MSMEs also, that if they outgrow the size of what is defined as an MSME, they’ll lose the benefits that they get as an MSME itself. Outgrowing this definition meant outgrowing and going out of receiving benefits. Therefore MSMEs preferred to remain within the definition rather than grow. Now we are coming with a change in the definition of MSMEs so that they need not worry about growing in size; they will still be able to get quite a lot of benefits which otherwise, as an MSME, they have got,” said Finance Minister Nirmala Sitharaman while announcing the first tranche of measures under the Atma Nirbhar Bharat stimulus package.

Under the new definition, manufacturing and services enterprises with investments up to Rs 1 crore and turnover up to Rs 5 crore will be classified as micro enterprises. For small enterprises, the investment criteria has been revised upwards to Rs 10 crore, with the turnover criteria of Rs 50 crore added to the mix. Enterprises with investment up to Rs 20 crore and turnover up to Rs 100 crore will be termed medium enterprises.

The government will bring necessary amendments to law to bring these changes to effect.

“A revision in the definition of MSMEs with an upward revision in their investment limit will help in the seamless expansion of small and medium businesses in the country. A robust MSME sector is key to improving the economic strength and resilience of the country and making it highly self-reliant and globally competitive,” said Mahesh Singhi, Founder and MD, Singhi Advisors.

“The upward revision in the investment limit of MSMEs will help bring an increased number of MSME units access to institutional working capital,” stated Rajesh Narain Gupta, Managing Partner, SNG & Partners.