MSMEs are the backbone of the Indian Economy

MSMEs are the backbone of the Indian Economy

MSME is Micro, Small & Medium Enterprise. It is the backbone of the Indian economy. Some of the largest industries and businesses rely on this network of MSMEs to cater to their customers and global markets.

India has approximately 63 Million MSMEs. Micro, small, and medium Enterprises (MSMEs) are the growth accelerators of the Indian economy, contributing about 30% of the country’s gross domestic product (GDP).

• In terms of exports, MSMEs are an integral part of the supply chain and contribute about 40% of the overall exports.
• MSMEs also play an important role in employment generation, as they employ about 110 million people across the country.

This sector can make India self-reliant with the wide range of products and services they offer. That’s why we say MSMEs are the backbone of the Indian economy. Recognizing this, the government of India has also announced a lot of schemes to benefit this sector through the Atmanirbhar Bharat initiative.

The MSME sector alone creates employment for close to 110 Million people in India. Imagine the cascading effect this has on the entire economy. This base is constantly increasing with new businesses starting everyday.

Classification of MSMEs

As per the new definition, various units will now be classified as below.

· Micro enterprises – Investment of less than `1 Cr and turnover less than `5 Cr

· Small enterprises – Investment of less than `10 Cr and turnover less than `50 Cr

· Medium enterprises – Investment of less than `50 Cr and turnover less than `250 Cr

Registration requirement

With effect from 1 July 2020, all existing MSMEs and the new MSMEs are required to obtain ‘Udyam’ registration which is a simple online registration based on self-certification. Aadhaar number is mandatory for obtaining the Udyam registration application.

The Aadhar number in case of a proprietor would be that of the individual. In case of a Hindu Undivided Family (HUF), the Karta’s Aadhaar number would be quoted and in case of partnership firm, it should be that of the managing partner.

In case of a company, a limited liability partnership, a cooperative society, a society or a trust, the Aadhar number of the authorized signatory of the relevant entity would need to be provided.

On completion of registration, an e-certificate namely ‘Udyam Registration Certificate’ will be provided to the MSME unit. Though Udyam registration for MSMEs is optional, there are various registration-based benefits that an MSME unit is eligible for, thereby supporting the case for obtaining such registration.




Following are a few highlighting features of new MSMEs –

1. A provision of Collateral Free Loans to MSMEs
2. An arrangement of loans to MSMEs MSME worth of Rs. 3 lac crores
3. An offer for MSMEs to get a Moratorium period of 12 months
4. Consideration of Manufacturing and Service MSMEs as the same entities
5. MSME is a granted a repayment Tenure of 48 months
6. MSMEs are assured a 100% Credit Guarantee
7. Reclassification of MSMEs will benefit approximately 45 Lac units.

Features of MSMEs  

1. MSMEs work for the welfare of the workers and artisans. They help them by giving employment and by providing loans and other services.
2. They promote the development of entrepreneurship as well as up-gradation of skills by launching specialized training centres for the same.
3. They support the up grading of developmental technology, infrastructure development, and the modernization of the sector as a whole.
4. MSMEs are known to provide reasonable assistance for improved access to the domestic as well as export markets.
5. They also offer modern testing facilities and quality certification services.
6. Following the recent trends, MSMEs now support product development, design innovation, intervention, and packaging.

The Indian MSME sector provides silent support to the national economy and acts as a defence against global economic shock and adversities. Hence, we can say that India is propelling towards a robust global economy through a silent revolution powered by MSMEs.

Many businesses miss out on incredibly attractive opportunities either due to lack of information or sometimes because of the procedures and compliances to follow. In most cases these registrations are a onetime activity and with the right assistance it’s a breeze.

Once you have the MSME registration in place, it comes with a host of benefits that will help you grow exponentially, you have the right product and ability to execute orders on time.

EOB helps you with all the MSME registration services and we will also provide value added inputs about all the other schemes and opportunities to help you grow your business. Remember, EOB is your catalyst for growth. At every step. We truly believe MSMEs are the backbone of the Indian economy.

Check out our website for our host of services designed just to cater to the MSME segment. You will find everything you wish to know about growing your business and the compliances needed to catapult your business to the next level of growth.

There is a separate blog dedicated only to the benefits of the MSME schemes announced by the government. A link to the same is provided here.

Credit: Some of the points in this blog have been incorporated from an article on MSMEs published in “The Mint”.

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