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Micro, Small, and Medium Enterprises (MSMEs) are pivotal to India’s economic framework, significantly contributing to employment generation, industrial production, and exports. Established under the Micro, Small & Medium Enterprises Development (MSMED) Act of 2006, MSMEs have become the backbone of India’s economy. The Government of India has recognized their importance by revising the criteria for MSME classification, which came into effect on 1st July 2020. This article delves into the classification, role, and benefits of MSMEs, highlighting their essential contribution to the nation’s economic development.

What is MSME?

Micro, Small, Medium Enterprises (MSMEs) are entities that are involved in the production, manufacturing and processing of goods and commodities.

The concept of MSME was first introduced by the government of India through the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006.

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in India’s economic landscape, contributing significantly to employment generation and industrial production. Recognizing their importance, the Government of India has introduced revised criteria for MSME classification, effective from 1st July 2020.

Classification of MSMEs

MSME’s are classified as per their turnover and investment. The new classifications as per the Aatma Nirbhar Bharat Abhiyan Scheme in 2020 is given in the table below:

Micro, Small and Medium Enterprises Classification 2020

Size of the Enterprise Investment and Annual Turnover
Micro Investment less than Rs. 1 crore

Turnover less than Rs. 5 crore

Small Investment less than Rs. 10 crore

Turnover up to Rs. 50 crore

Medium Investment less than Rs. 20 crore

Turnover up to Rs. 100 crore

Ministry of Micro, Small and Medium Enterprises

The Ministry of Micro, Small and Medium Enterprises, a branch of the Government of India, is the apex executive body for the formulation and administration of rules, regulations and laws relating to micro, small and medium enterprises in India. The Minister of Micro, Small and Medium Enterprises is Nitin Gadkari and the Minister of State is Pratap Chandra Sarangi since 31 May 2019.

Under the Micro, Small and Medium Enterprises Development Act, 2006, the Government of India established The National Board for Micro, Small and Medium Enterprises (NBMSME) to examine the factors affecting promotion and development of MSME. This board also reviews the existing policies and suggests recommendations to the Government for the growth of the MSME sector

The services provided by the Ministry of MSME are as follows:

  • Facilities for testing, training for entrepreneurship development
  • Preparation of project and product profiles
  • Technical and managerial consultancy
  • Assistance for exports
  • Pollution and energy audits.

The MSME sector is considered the backbone of the Indian economy that has contributed substantially to the economic development of the nation. It generates employment opportunities and works in the development of backward and rural areas. India has approximately 6.3 crore MSMEs.

In addition, due to the following features, they are considered a viable source of income for those looking to venture into the manufacturing industry.

Role of MSMEs in Economic Development

Importance of MSME Filing

1. Legal Compliance: Filing ensures that MSMEs adhere to government regulations, maintaining transparency and accountability.

2. Access to Benefits: Registered MSMEs can avail various benefits, including subsidies, tax exemptions, and financial support.

3. Government Schemes: Timely filing helps MSMEs to qualify for government schemes aimed at promoting growth and development.

4. Credit and Loans: Proper filing and registration enhance the credibility of MSMEs, making it easier to obtain credit and loans from financial institutions.

5. Market Opportunities: Registered MSMEs gain better opportunities for public procurement and participation in government tenders.

MSMEs contribute to approximately 8% of India’s GDP, employ over 60 million people, have an enormous share of 40% in the exports market and 45% in the manufacturing sector. Hence, they are of paramount importance for overall economic development of India.

MSME Registration Process

To avail the benefits and comply with regulations, MSMEs need to register under the MSME Act. The registration process is simple and can be completed online.

1. Udyam Registration: As of July 2020, the Udyam Registration portal (https://udyamregistration.gov.in) is the official platform for MSME registration. The process is entirely online and paperless.

2. Required Information:

    • Aadhaar number of the proprietor/partner/director.
    • PAN number and GSTIN (if applicable).
    • Details of the enterprise such as name, type, address, bank details, and investment in plant and machinery or equipment.

3. Registration Process:

    • Visit the Udyam Registration portal.
    • Enter the Aadhaar number and validate it with an OTP.
    • Fill in the details of the enterprise and submit the application.
    • On successful submission, a registration number and certificate will be issued.

Benefits of MSME Filing: Filing as an MSME brings several advantages. Firstly, it enables access to government subsidies for technology upgrades, quality certifications, and market development. Secondly, registered MSMEs can obtain collateral-free loans through the Credit Guarantee Fund Scheme. Additionally, they benefit from priority sector lending by banks, ensuring easier access to credit. Moreover, MSMEs enjoy tax exemptions and rebates under the Income Tax Act. Lastly, registration facilitates participation in government tenders and procurements, enhancing market opportunities and business growth.


MSME filing is a critical aspect of maintaining compliance, accessing benefits, and ensuring the growth and sustainability of micro, small, and medium enterprises in India. By understanding the registration and filing process, MSMEs can leverage government schemes and financial support to enhance their operations and contribute to the overall economic development of the country.



Author Bio

Priyanka Gupta is an associate member of the Indian Institute of Chartered Accountants of India, commencing her career as an internal auditor in 2016. Over the years, she has accumulated valuable experience working with esteemed business houses and consulting firms, including Aneja Associates and Ru View Full Profile

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July 2024