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NEW DEFINITION OF MSMES SOON

Why in news?

Union Minister for Micro, Small and Medium Enterprises (MSME) told the Rajya Sabha on 19th March 2020, that the government would come out with a new definition of MSMEs, which are currently defined on the basis of investment in plant and machinery, by the end of the ongoing session.

What are MSMEs?

  • MSME stands for Micro, Small, and Medium Enterprises.
  • The Micro- Small and Medium Enterprises (MSMEs) are small sized entities, defined in terms of their size of investment.

In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, the enterprises are classified into two divisions.

  1. Manufacturing Enterprises

The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.

  1. Service Enterprises

The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment..

Definition of Micro, Small and Medium Enterprises:

Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

  • A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
  • A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore;
  • A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs.10 crore.

Significance of MSMEs

  • As per the ‘MSME at a Glance’ Report of the Ministry of MSMEs, the sector consists of 36 million units and provides employment to over 80 million persons.
  • The Sector produces more than 6,000 products contributing to about 8% of GDP besides 45% to the total manufacturing output and 40% to the exports from the country.
  • They are contributing significantly to output, employment export etc. in the economy.
  • They perform a critical role in the economy by providing employment to a large number of unskilled and semi-skilled people, contributing to exports, raising manufacturing sector production and extending support to bigger industries by supplying raw material, basic goods, finished parts and components, etc.
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