• Union Minister Nitin Gadkari announced inclusion of retail and wholesale trade under MSMEs as per which they will also now get the benefit of priority sector lending under RBI guidelines.

• The retail and wholesale trade sector was left out of the ambit of MSMEs (micro, small and medium enterprises). Now under the revised guidelines, retail and wholesale trade will also benefit from priority sector lending under RBI guidelines.

• The revised guidelines will benefit 2.5 crore retail and wholesale traders. The move would also allow them to register on the Udyam portal.

• With this, traders will be able to avail requisite finances from banks and financial institutions under priority sector lending. Also, the traders can avail the benefits of several other government schemes for MSMEs.

MSME sector

• The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades.

• It contributes significantly in the economic and social development of the country by fostering entrepreneurship and generating large employment opportunities at comparatively lower capital cost, next only to agriculture. 

• MSMEs are complementary to large industries as ancillary units and this sector contributes significantly in the inclusive industrial development of the country. 

• They are widening their domain across sectors of the economy, producing a diverse range of products and services to meet demands of domestic as well as global markets. 

• The MSMEs in India are playing a crucial role by providing large employment opportunities at comparatively lower capital cost than large industries as well as through industrialisation of rural and backward areas,  reducing regional imbalances, assuring more equitable distribution of national income and wealth.

• Nearly 30 per cent of the GDP in Indian economy is contributed by the MSME sector.

• As per the National Sample Survey (NSS) 73rd round, conducted by National Sample Survey Office during the period 2015-16, there were 633.88 lakh unincorporated non-agriculture MSMEs in the country engaged in different economic activities.

• Micro sector with 630.52 lakh estimated enterprises accounts for more than 99 per cent of total estimated number of MSMEs. Small sector with 3.31 lakh and medium sector with 0.05 lakh estimated MSMEs accounted for 0.52 per cent and 0.01 per cent of total estimated MSMEs, respectively. 

• Out of 633.88 estimated number of MSMEs, 324.88 lakh MSMEs (51.25 per cent) are in rural areas and 309 lakh MSMEs (48.75 per cent) are in urban areas.

• As per the survey, MSME sector has been creating 11.10 crore jobs (360.41 lakh in manufacturing, 0.07 lakh in non-captive electricity generation and transmission, 387.18 lakh in trade and 362.82 lakh in other services) in the rural and the urban areas across the country.

• Uttar Pradesh has the largest number of estimated MSMEs with a share of 14.20 per cent of MSMEs in the country. It is followed by West Bengal and Tamil Nadu, says the survey.

Change in definition of MSMEs

Last year, the Union Cabinet cleared the upward revision of the definition of micro, small and medium enterprises (MSMEs). 

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the MSMEs are classified as below:

1) A micro enterprise, where the investment in plant and machinery or equipment does not exceed Rs 1 crore and turnover does not exceed Rs 5 crore.

2) A small enterprise, where the investment in plant and machinery or equipment does not exceed Rs 10 crore and turnover does not exceed Rs 50 crore.

3) A medium enterprise, where the investment in plant and machinery or equipment does not exceed Rs 50 crore and turnover does not exceed Rs 250 crore.

The new classification came into effect from July 1, 2020. 

A new composite criteria of classification for manufacturing and service units was notified on June 26, 2020, with guidelines regarding composite criteria to facilitate the present and prospective entrepreneurs. 

Now, there will be no difference between manufacturing and service sectors. Also, a new criterion of turnover has been added in the previous criteria of classification based only on investment in plant and machinery. The new criteria is expected to bring about many benefits that will aid MSMEs to grow in size. 

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