The Micro, Small and Medium Enterprises (MSME) Ministry is reportedly finalising the new definition of MSME based on annual turnover. In 2018, Prime Minister Narendra Modi had proposed this.
Sudakshina Gupta, Professor, Department of Economics, University of Calcutta, told BE, “According to the government’s new definition, businesses with revenue of `5 crore will be called a micro enterprise, those with sales between `5 crore and `75 crore will be deemed as small and those with revenue between `75 crore and `250 crore will be classified as medium-sized enterprises. Under the earlier definition, manufacturers with `25 lakh investment in plant and machinery were termed micro enterprises and those with investments between `25 lakh and `5 crore were regarded as small enterprises. Firms with investments of up to `10 crore were classified as medium.” The MSME Ministry reportedly wants to remove the difference between the manufacturing and services sector that is there in the present investment-based definition.
An MSME stakeholder told BE, “This has both positives and negatives. There will be fewer constraints on investment plans for the enterprises. Investment opportunity will be more. But the micro and small enterprises, which have a very low turnover, will suffer due to this new definition. Similarly, the medium enterprises will reap greater benefit.”
Professor Gupta told BE, “However, the definition shifts from investment to revenue. This means that the MSME sector now has to face more competition than before, as the units have to show revenue in order to be defined as micro, small or medium. Only making investment will not fetch them the required protection. It is not only within the sector that they will have to compete, but also with the larger units to earn the minimum stipulated revenue and hence, the protection from loan repayment conditions.”