Revised definition of Micro, Small and Medium Enterprises (MSME)
Finance Minister of India, Smt. Nirmala Sitharaman in her speech on May 13, 2020 has announced the revision of the definition of the Micro, Small and Medium Enterprises (MSME). To read about MSME and its old definition you can read our article at the following link.
How is MSME defined (Then vs Now)
Earlier the MSME was defined based on whether the MSME was a Manufacturing Enterprises or Service Enterprise. In the case of Manufacturing Enterprises, it was defined in terms of investment in Plant & Machinery. While a Service enterprise was defined in terms of investment in equipment. The MSME was classified as Micro Enterprises, Small Enterprises or Medium Enterprises based on the investment in Plant & Machinery in the case of the Manufacturing sector and investment in equipments in the case of the Service Sector.
What’s new in the revised definition of MSME
- The definition of MSME is now based on “Investment And Annual Turnover”
- In the new definition, the different definition of Manufacturing Sector and Service Sector has been done away with.
- A new concept of turnover has been introduced.
- The investment limit has been revised upwards.
Old Definition of MSME
| Enterprises | Manufacturing Enterprise (Investment in plant & machinery) |
Service Sector (Investment in equipments) |
| Micro Enterprises | Does not exceed Rs 25 lakh | Does not exceed Rs 10 lakh |
| Small Enterprises | More than Rs 25 lakh but does not exceed Rs 5 crore | More than Rs 10 lakh but does not exceed Rs 2 crore |
| Medium Enterprises | More than Rs 5 crore but does not exceed Rs 10 crore | More than Rs 2 crore but does not exceed Rs 5 crore |
New Definition of MSME
| Category | New Capital | New TurnOver |
| Micro | Rs 1 Crore | Rs 5 Crore |
| Small | Rs 10 Crore | Rs 50 Crore |
| Medium | Rs 50 Crore | Rs 250 Crore |
How the revised definition of MSME will benefit MSME?
- It will help in the seamless expansion of small and medium businesses in the country.
- The upward revision in the investment limit of MSMEs will help bring an increased number of MSME units access to institutional working capital