MSME (Micro, Small, Medium enterprises) definition is enumerated in the MSMED Act of 2006, It was changed recently by the Govt. of India to bring it with the tune of GST.
Importance of MSME:
1. After the agriculture sector, MSME sector employs the most number of people, about 46%
2. It contributes roughly 28% to GDP of India
3. 99% MSME sectors are micro in nature
4. It produces more than 6000 types of items
5. Comprises 50% of total exports
Benefits of the recent changes
1. Now more business and industries can come under the definition of MSME and avail the benefits
2. More companies would come under the purview of GST (Goods and Services Tax)
3. By merging the definition of the manufacturing sector and service sector, confusion has been avoided
4. It would help MSME sectors to grow
Cons of recent changes
1. As more companies would now come under the ambit of MSME, the industries which were already in the micro sector would get fewer benefits as compared to earlier.
2. Turnover to Investment ratio (TIR) of Indian industry is at an average of 1 – 1.2 (which means that for every 1$ that I invest in a company, I’ll have a return/ turnover of 1.2$) therefore it is doubtful whether an investment of 1 cr. can generate a turnover of 5 cr. (cr = crore )
3. Countries like the USA, Japan, and European Union consider the definition of SME (small, medium enterprises) based on the number of employees and investment.
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