Being repsonsible for contributing the expansion of entrepreneural endeavours the Micro, Small and Medium Enterprises sector (hereinafter MSME)  has been widening its domain across country. The recent data published by the government through the ministry of MSME  speaks that there are nearly 633.88 lakhs MSMEs out of which 630.52 lakh are only micro-enterprises. MSME stands for Micro, Small, and Medium Enterprise. The fact that the sector alone contributes almost 30% of total GDP and 45% to the total export, has earned it the status of an “indispensable part” in the development of the nation.

How MSMEs came into life?

The seeds of the need self-reliancy and employment generation have started long back ago, right with the efforts of Swadeshi movement. The swadeshi moment that started around 1905 has impacted in the sense of rejuvenating the feeling of self-sufficiency by encouraging village and local industries. Not only the movement focused on achivement of self reliancy but it also responsible in providing employment to the people. Later the enactment of industrial policies since independence has a crucial contribution in the promotion of small- scale sector.


A brief view of industrial policy since independece

A. The Industrial policy 1948

– The first Industrial Policy was annouced on 6th april 1948 introduced by Dr. Shyama prasad mukherjee the then industry minister.

– The policy introduced a mixed economy wherein private and public sector were accepted as a two domain for the economic development

– Categorization of large industry under it were as further

Sr. no. Industries with exclusive state monopoly/strategic industries Industries with government control Industries with mixed sector Industry in private sector
1 Industries engaged in – Industries of national importance – Such industries that allowed to operate in public and private sector Rest of the industries also such
2 atomic energy, railways and arms and ammunition fertilizers, heavy machinery, defense equipment, heavy chemicals small buisness, and small industries enganged in utilization of local resources and generate employment

B. The Industrial policy 1956

– It was announced on 20th april 1956 that replaced the earlier one

– The approach of the policy was non discriminatory to the private sector and promotion of village and small – scale industries

C. The Industrial policy 1980

– The policy was announced on 23rd july 1980 it redefined the role of small scale units

– The policy was responsible to promote ancillarisation

D. The Industrial policy 1990

– The policy was announced by Janata Dal government in 31st may 1990

– It raised investment ceiling of small scale industries in terms of plant and machineries from 35 to 60 lakhs and for anicilliary units from 45 to 75 lakhs whereas for tiny units would be increased from present Rs.2 lakhs to Rs.5 lakhs.

– The industrial policy 1990 encourage exports and dispersal in rural areas

– The Units with at least 30 per cent of annual production for export were per­mitted to step up their investment in plant and machinery to Rs. 75 lakhs

E. The New industrial policy 1991

– The Private sector under this policy were given welcome in major industries previously reserved for government industries

– Intended with the promotion of small, tiny and village industries approach of protection replaced with competitiveness

– Responsible for Liberalisation, privatisation and globalisation

– The policy abolished industrial licensing that become limited to less than 15 sectors

The Industrial Development and Regulation Act, 1951:

The Industrial Development and Regulation Act, 1951 was introduced and effective from 8th may 1952. It provide the industrialisation strategy by laying out the basic framework.  The framework of the fact based on captial intensive heavy industries ultimately leading the development of Ancilliary unit- to cater the demand of large industry.

Further Section 11B of the act introduced vide amendment act of 1984, effective from 12th January 1984 empowers the central government to specify factors to regard the industrial undertaking as Small Scale or as an Ancillary industrial undertaking.

Invoking such power the Central Government vide notification of the Ministry of Industry number S. O. 857(E), dated 10th december 1997 specified below factors

a. Small scale industrial undertaking: An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms of on lease or on hire purchase, does not exceed rupees three crores;

b. Ancillary industrial undertaking: An industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts components, sub-assemblies, tooling or intermediates, or the rendering of services, and undertaking supplies or proposes or supply or renders not more than fifty per cent of its production or services, as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupees three cores.

Ultimately the Small Industries Development Organization (SIDO) was setup in 1954 as an apex body for sustained and organized growth of small enterprises. Thereafter  Small Industries Service Institute (SISI) set up in 1954 branches all over India to train youth in skills, and the tool rooms were established with German and Danish assistance for providing technical services essential to small enterprises for skilled training.

In 1956, the National Small Industries Corporation, The Khadi and Village Industries Commission and the Coir Board were also setup. The Small Industries Development Bank of India was established on 2 April 1990 and a Technology Development and Modernisation Fund was created to accelerate financial and technical services to the sector by SIDBI.

The Interest On Delayed Payments To Small Scale And Ancillary industrial Undertakings Act, 1993

The Interest On Delayed Payments To Small Scale And Ancillary industrial Undertakings Act, 1993 introduced to facilitate prompt payment of dues to MSEs. The 1993 act had a provision of compound interest to be levy upon buyer in case of default in payment to small scale and ancilliary industrial undertakings where the delay is more than 30 days of accepting goods/services or surpasses the agreed date in agreement.

The Ministry of Small Scale Industries and Agro & Rural Industries (SSI & ARI) came into being from 1999 to provide focused attention to the development and promotion of the sector.

Further a Credit Linked Capital Subsidy Scheme was launched in October 2000 to encourage technology upgradation in the MSE sector and a Credit Guarantee Scheme was started August 2000 to provide collateral free loans to micro and small entrepreneurs, particularly the first generation entrepreneurs. Despite such efforts a need of full fledge legislation governing the small industries was felt.

Finally the Micro, Small Medium Enterprises Development Act 2006 was introduced effective from 2nd october 2006 for faciliating development of this enterprises. On 9th may 2007 with the amendment in the Governmet of India (Allocation of Business) Rules, 1961 the Ministry of Small Scale Industries  and Ministry of Agro and Rural industries merged into Ministry of Micro, Small & Medium Enterprises

Three important changes took place:

a. The concept of “enterprise” replaced the former concept of “industry”

b. The resultant change was recognition & coverage of “services” by the Ministry of MSME

c. It defined medium enterprises for the first time, seeking integration of the three segments of enterprises namely MICRO, SMALL AND MEDIUM

The sectors contemplates the idea of entreprenuership and has categories the same into Micro, Small and Medium based on the criteria of investment and now includes the Retail and wholesale trade businesses (who are eligible to avail the benefits of priority sector lending) vide government’s circular dated 2nd July 2021  The latest threshold given for MSME published by M/o MSME vide its circular dated 1st June 2020 is as below:

Classification Micro Small Medium
Manufacturing Enterprises and Enterprises rendering Services Investment in Plant and Machinery or Equipment:
Not more than Rs.1 crore and Annual Turnover ; not more than Rs. 5 crore
Investment in Plant and Machinery or Equipment:
Not more than Rs.10 crore and Annual Turnover ; not more than Rs. 50 crore
Investment in Plant and Machinery or Equipment:
Not more than Rs.50 crore and Annual Turnover ; not more than Rs. 250 crore

list of additional activities included under MSMEs are as under:

45 Wholesale and retail trade and repair of motor vehicle and motorcycles
46 Wholesale trade except of motor vehicles and motor cycles
46 Retail Trade Except of Motor Vehicles and motor cycles

MSME Registration

It is not enough that the enterprises should fit into criteria of the classification to be recognised as MSMEs. A compulsory registration is required in order to avail benefits provided and initiated by government.

MSME Registration process new registration portal

The registration of MSME is complete online process available on the registration portal maintained by the ministry. An enterpirse intending to established or recognised as micro, small, and medium enterprise have to file for Udyam Registration online on the Udyam Registration portal

The Registration based on self-declaration that requires no documents, papers, certificates or proof. Upon registration a Permanent Identity Number to be known as “Udyam Registration Number”. Subsequent to that the  “Udyam Registration Certificate” shall be issued

  • Significant detail new entreprenuer should know

– Form of registration application available only at Udyam Registration portal.

– The registration is completely free

– Aadhaar number is necessary of

a. Proprietor in case of proprietorship

b. Managing partner in case of partnership

c. Of karta in case of HUF

d. The authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number in case of company/LLP/Cooperative society/Society/Trust/Organisation

Priority Sector Lending

The policy of priority sector lending is mandated by Reserve Bank of India which requires for banks specifically Scheduled Commercial Bank excluding Regional Rural Banks (RRBs) and Small Finance Banks (SFBs) to offer a percentage of their loans to specific sectors which are looked upon as impacting larger section of population, employment- intesive that are Agriculture, MSMEs, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy & others.

The categories of sector treated as priortiy sector are:

1. Agriculture

2. Micro, small and medium enterprises

3. Export credit

4. Education

5. Housing

6. Social infrastructure

7. Renewable energy

8. Other

The master direction of RBI can be access at As per the said direction the Priority Sector Lending account for 40% of adjusted net bank credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher out of which 7.5 secured for MSMEs.

Initiatives of M/o MSME

MSME Samadhaan  

The MSMED Act 2006  u/s 32 repealed the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, and a Chapter V of the 2006 act deals with Delayed payment to MSEs [Ss 15 to 25] introduced which provides that the MSEs can file delyaed payment cases at online portal of MSME Samadhaan launch on on 30.10.2017. In the case of delay in payment beyond 45days, MSEs suppliers may approach the Micro and Small Enterprises Facilitation Council(MSEFC) constituted under the Act in all State/UTs. Under Section 16 of the MSMED Act, delayed payment to supplier units, attracts compound interest with monthly interests at three times of the bank rate notified by the Reserve Bank. The portal gives information about individual CPSEs/Central Ministries, State Governments etc. and other buyers regarding the payments pending with them in respect of the MSEs. The Central Ministries/State Governments have been provided with user- ID and password to login and monitor the delayed payment cases in respect of organizations under their jurisdiction.

The said portal also facilitates MSEs to file their delayed payments related complaints online. After 15 days of online filing of the case, it is registered by the MSEFC concerned. The States like Punjab, Maharashtra, Telangana, Hyderabad & Odisha, Tamilnadu, NCT of Delhi and U.P. have more than one MSEFC. M/o MSME also provide funds to the National Institute for Micro, Small & Medium Enterprises (NI-MSME), Hyderabad for organizing training for the members of MSEFCs of theState/UTs who deal with cases of delayed payment and acquaint them with relatedrules and regulations on delayed payment to Micro & Small Enterprises.


Ministry of MSME had launched “MSME-SAMBANDH Portal” on 8th December; 2017. The portal helps in monitoring the procurement by Central Government Ministries, Departments and Central Public Sector Enterprises (CPSEs) and also enables them to share the list of required products/services from MSEs.

The portal features, inter alia, the following: –

  • Availability of updated and timely information on Public procurement, on weekly/ monthly basis.
  • Monitoring the procurement done by the Ministries/ Departments and CPSEs.
  • Enabling CPSEs to upload list of products/services required.
  • Dashboard providing summary of Procurement.

MSME Sampark

A job portal called “MSME SAMPARK” has been launched by the Hon’ble President of India on 27.06.2018. This portal is a digital platform wherein jobseekers (i.e. passed out trainees / students of MSME Technology Centres) and recruiters can register themselves for mutually beneficial interaction.


CHAMPIONS stands for Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength. The portal was launched on 1st june 2020. It is an ICT based technology system for making the smaller units big by helping and handholding them. The portal is not only helping MSMEs in the present situation, but also providing guidance to grab the new business opportunities.

In addition to helping MSMEs provide guidance to new business opportunities it had set up Control room set up in new delhi and 68 state level control rooms to provide support including finance, market access, technology upgradation, skill development etc.

– Highlight of platform

ii. Regularly update on recent development in MSME

iii. 56 banks/financila institutitiona/ regiional rural banks on boarded to resolve queries of credit

iv. 52 CPSEs onboarded

v. GeM onboarded

Even though the micro and small enterprises comprises largest portion of the MSME Sector the factors such lack of technological advancement, inadequate access to market platforms restricted the growth potential of MSEs. This very reason prompted the government to come up with various initiatives to improve market access and competitiveness for such Micro and Small enterprises. Subsequently, the procurement mechanism was initiated through the enactment of the Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 effective from 1st April 2012.

The policy obligated the Central Ministries/Departments and Central Public Sector Enterprises (CPSEs) for annual procurement from the enterprises belonging to the MSEs. The said policy was later amended vide gazette notification dated 9th November 2018.

A. The Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2018

The Policy:

  • Public Procurement Policy for MSEs Order, 2018 has been notified under section 11 of MSMED Act, 2006.
  • The Policy is effective from 1st April 2019 (Gazette notification on 9 November 2018).
  • The objective of Policy is promotion and development of Micro and Small Enterprises by supporting them in marketing of products produced and services rendered by them. However, the policy rests upon core principle of competitiveness, adhering to sound procurement practices and execution of supplies in accordance with a system which is fair, equitable, transparent, competitive and cost effective.

How the procurement policy is beneficial for budding MSEs?

Effect of policy:

since the policy (as amended in 2018) mandates 25 % of annual procurement by Central Ministries/Departments/Public Sector Enterprises (CPSEs) which include 4% from MSEs owned by SC/ST and 3% from MSEs owned by Women entrepreneurs (Paragraph 4-4A).

It certainly enhances the participation of such MSEs and opened the doors of opportunities.

  • Definition of MSEs owned by SC/ST:

a. In the case of proprietary MSE, the proprietor(s) shall be Sc/St.

b. In the case of partnership MSE, the Sc/St partners shall be held at least 51% shares in the unit.

c. In the case of Private Limited Companies, at least a 51% share shall be held by Sc/St promoters.

  • Definition of MSEs owned Women Entrepreneurs:

The MSEs owned and controlled by a woman having a minimum financial interest of 51 percent of the capital and giving at least 51 percent of the employment generated in the enterprise to women.

  • Reserved Items: In addition to the mandatory procurement the policy contains a list of 358 items that are reserved for the exclusive procurement from MSEs.

The list includes A-Z items from clothing, electronics tools to wooden items the same is available at  This feature provides immense scope for budding entrepreneurs looking for entering the MSE world.

  • Who are buyers?

Every central ministry/department and central public sector undertaking has an annual target of 25% of annual procurement out of a sub-target of 4% and 3% of procurement target from MSEs owned by Sc/St and Women Entrepreneurs respectively. There are a total of 51 Ministries in the country and 67 central departments, and 348 CPSEs so far. This signifies a sufficient no. of buyers.

  • Who are sellers?

All MSEs satisfying the criteria as per revised definition and the same been registered under the online registration portal namely Udyam Registration Portal maintained by the ministry can avail the benefit of the policy.

The government is certainly encouraging the MSMEs to avail the benefit of the online market platform maintained by it namely the Government e-Marketplace

This portal faciliate an online procurement of goods/services by the Government Organisations / Departments / PSUs.

Features of GeM portal:

1. Drive business with ease

2. Direct access to largest buyers in the country

3. Direct purchase, Bids, and reverse auction

4. Transparency and security

5. Demand forecasting

How to avail of the benefit of GeM?

As an effort to get the potential MSMEs registered on GeM the facility button is provided on the Udyam Registration Form, to enable the entities to positively be a part of GeM sellers.

The potential sellers need a vendor registration on the portal based on self-certification. It required a document of identification proof, primarily Adhaar. The basic requirement in nutshell is:

1. Constitution Type such as Proprietorship, Firm, Company, Trust or Society and Central Government/State Government.

2. Constitution Name.

3. Aadhaar Number or Personal PAN of the user (Authorized signatory of ITR)

4. For Aadhaar based registrations, a mobile number that is linked with the Aadhaar is required.

5. Documents such as CIN, PAN, DIPP, UAM, ITR details as per the constitution of the organization may be required for seller registration.

6. Address of the organization.

7. Bank account details of the organization

8. Active email id.

It should be noted that Adhaar is no longer mandatory for seller registration and they have an option to use Personal PAN for Identity Verification while doing the seller registration. For sellers registering in MSE capacity, the portal provides an option to select an organisation as an MSE, subsequently, the MSE has to provide the Udyam Registration number and the mobile number or Aadhaar number linked with such registration.

How MSEs benefitted from GeM?

Since the government is required to mandatorily procure by the MSEs as per the policy, the registered MSEs on GeM certainly add up to their sales. The data suggest that presently there are 6,95,432 MSEs registered on GeM contributing 56% of the total order value on GeM

Womaniya – an initiative by GeM: The GeM portal is very active with certain initiatives exclusively focus on the development of MSEs of one such initiative is Womaniya, it is aligned with the government efforts of boosting women entrepreneurship by obligating 3% procurement by government bodies. The initiative facilitates women created products such as handicrafts and handloom, accessories, jute and coir products, bamboo products, organic foods, spices, home décor and office.

The Saras Collection:

It is yet another initiative led by GeM which facilitates procurement of products particularly handcrafted collection of handicrafts, handloom textiles, office décor, furnishings, accessories, event souvenirs, personal hygiene and care products. It ensures active participation through women entrepreneurs and micro-enterprises.

Our government is doing best to boost the MSME ecosystem & promoting the entreprenuership, if you are planning to start a buisness or already have an entity/ startup get it registered under the MSME and be eligible to wide range of benefits that includes finance, market access, export facility, upgrading quality and technology and many more.

Thank you!

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September 2021