MSME Full Form

What is MSME?

MSME full form is Micro, Small and Medium Enterprise (MSME). According to the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, entities that involved in manufacturing, production, processing goods and commodities will fall in MSME.

MSME sector plays a vital role in economic growth in India. In fact, The Indian MSMEs sector contributes about 29% towards the GDP through its national and international trade. Additionally, MSMEs generate more employment opportunities in rural areas where big companies haven't stepped in. India has approximately 6.3 crore MSMEs.

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What Types of Business Comes Under MSME?

Micro, Small and Medium Enterprises (MSME) are classified into two classes i.e. Manufacturing Enterprises and Service Enterprises.

The enterprises are further categorized based on investment in equipment and annual turnover.

CriteriaManufacturingService
TurnoverInvestmentTurnoverInvestment
MicroRs. 5 croreLess than Rs. 25 lakhRs. 5 croreLess than 10 Lakh
SmallRs. 50 croreMore than Rs. 25 lakh but less than Rs. 5 croreRs. 50 croreMore than Rs. 10 lakh but less than Rs. 2 crore
MediumRs. 250 croreMore than Rs. 5 crores but less than Rs. 10 croreRs. 250 croreMore than Rs. 2 crores but does not exceed Rs. 5 crore

Changes to MSME Definition

To provide a boost in the MSME sector, the government has recently made some changes in MSMEs under MSMED Act, 2006 which has been activated from July 1, 2020.

New MSME Definition

The new classification of what is MSME will fall into two categories, first, the annual turnover and the second is an investment in plant/machinery/ and manufacturing.

MSME: Investment and Annual Turnover
Sector/Enterprise TypeMicro EnterpriseSmall EnterpriseMedium Enterprise
Both (Manufacturing & Services Sector)Investment < Rs. 1 crore & Turnover < Rs. 5 croreInvestment < Rs. 10 crore & Turnover up to Rs. 50 croreInvestment < Rs. 50 crore & Turnover up to Rs. 250 crore

The advantage of the new MSME definition is:

Companies can avail of an MSME loan from Ziploan to expand their business and sales. The MSME loan eligibility criteria of Ziploan are easy to meet as we don't ask for bundles of documents.

Whether you want to do infrastructure improvement, upgrade machinery, manage working capital, or purchase raw materials, etc. MSME loan is a great choice you can opt for.

Old MSME Definition

As per the old MSME definition, Micro, Small and Medium Enterprise were classified on the basis of investment into two divisions as below:

Manufacturing SectorService Sector
Enterprise CategoryInvestment in plant and machineryMicro EnterprisesInvestment should not exceed Rs. 10 lakh
Micro EnterprisesShould not exceed Rs. 25 lakhSmall EnterprisesMore than Rs. 10 lakh, should not exceed Rs. 2 crore
Medium EnterprisesMore than Rs. 5 crores, shall not exceed Rs. 10 croreMedium EnterprisesMore than Rs. 2 crore, shall not exceed Rs. 5 crore

Features of MSMEs

Following are some of the crucial elements of MSMEs:


Some of the entities that work under the Ministry of MSME are as follows:

Some of the government schemes that promote MSME to people:

Role of MSMEs in Indian Economy

India has around 6.3 crores registered MSMEs. The number of registered MSMEs grew 18.5% Y-o-Y to reach 25.13 lakh units in 2020 from 21.21 lakh units in 2019. New online system of MSME/Udyam Registration launched by the Union MSME Ministry, w.e.f. July 01, 2020, successfully registered more than 1.1 million MSMEs until November 2020.

MSMEs have created more employment in rural areas where employment was a big challenge because of the lack of big industries and companies. MSMEs also play an important role when in need of low investment, flexibility in operations, cost-effective imports, and huge demand for production.

Moreover, MSMEs help entrepreneurs to learn new skills, adopt new technologies, and eventually help them set up a successful business and help in the nation's economy.

Contribution of MSMEs in Country’s Economy at Current Price

YearMSME Gross Value AddedGrowth (%)Total Grass Value AddedShare of MSME in GVA (%)Total GDPShare of MSME in GDP (in %)
2011-122622574-810694632.35873632930
2012-13302052815.17920269232.82994401330.40
2013-14338992212.231036315332.711123352230.20
2014-1537049569.291150427932.711246795929.70
2015-1640255958.651256664632.031376403729.20
2016-1744057539.441384159131.381525371428.90

Source: Central Statistics Office (CSO), Ministry of Statistics & Program Implementation

Importance of MSME

MSME has become the backbone of the Indian economy since 2006. It is responsible for large-scale employment in rural areas by providing them easy business loan and essential training. It contributes around 29% towards the GDP through its national and international trade.

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