MSME Industry In India- Role In Indian Economy!

. 12 min read
MSME Industry In India- Role In Indian Economy!

Table of Contents:

1. What Is Meant By MSME?

2. Definition Of MSME In India

3. MSME Sector In India

4. List Of MSME In India

5. Benefits Of MSME Registration

6. MSME Government Benefits

7. MSME Registration India

8. Government MSME Schemes For Entrepreneurs

9. What Are The Challenges Of MSME?

10. What Is MSME Training And Why Is It Important?

1. What Is Meant By MSME?

MSME full form stands for Micro, Small, and Medium Enterprises. Micro small scale industries are the absolute base of the pyramid of Indian economy. They are the mass employment providers and sustainers that contribute substantially to the growth and development of the country. Let’s learn more about the MSMEs.

2. Definition Of MSME In India

MSMEs or Micro, Small and Medium Enterprises contribute vastly to the Indian economy and account for more than 37 percent of the country’s Gross Domestic Product (GDP). There are more than 60 million MSMEs in the country and they employ more than 100 million people. MSMEs generate a mammoth of employment opportunities at a lower capital cost as compared to the large industries, but also help in industrialisation of rural and backward areas.

Most importantly MSMEs cater to the neighbourhood. It has the capacity to fill up the gaps at local level - be that gap pertaining to employment or consumption. Thus it reduces regional imbalances assuring a more equitable distribution of national income and wealth.

3. MSME Sector In India

On June 26, Ministry of Micro, Small and Medium revealed the new criteria  for MSMEs to get registered through the Udyam Registration portal. It also laid down the updated guidelines for investment and turnover for MSMEs. It is also noteworthy that the updated criteria include enterprises in the service and manufacturing segment. The latest guidelines exempt trading companies from the list.

Under the Atmanirbhar Bharat Abhiyan, Indian government has sanctioned collateral free automatic loan of INR 3 lakh crore to support the growth and sustenance of MSMes. In addition, the World Bank has offered a relief fund of USD 750 million for 15 crore MSMEs across the world.

4. List Of MSME In India

  • 48% share in the country’s export
  • Only 90.19 lakh are registered
  • 99.4% of MSMEs are micro enterprises
  • 0.52% are Small enterprises
  • 0.007% are medium enterprises

5. Benefits Of MSME Registration

Registered MSMEs enjoy several benefits from central and state governments that include exemption from excise duty, tax benefits, and reservation in delayed payment act, to name a few. Micro, Small and Medium Enterprises Development Act (MSMED Act) was introduced by the Parliament in 2006. This Act came with the promise to facilitate the promotion, development, and healthy competitiveness for MSMEs. Many benefits of MSME registration depend on the category under which it is registered.

  1. Tax Benefits- The corporate tax has been reduced by 5%, from 30% to 25%. This applies to those companies whose turnover is less than 50 crores. The timeframe for Minimum Alternative Tax has been increased by 15 years. The presumptive tax has also gone down by 2% for MSMEs with a turnover below Rs.2 crores.
  2. Bank Schemes- MSME owners are offered loans at a lower rate of interest by banks. If there is any delay in payment, they are given certain leeway.
  3. Excise Exemption- The government has exempted excise duty for those MSMEs whose turnover is less than rupees 1.5 crores in the first financial year. However, this benefit applies only to those MSMEs who manufacture goods under its brand name. For example, a reduced excise duty of 10% is levied on readymade garments for MSME certificate holders.

6. MSME Government Benefits

After the introduction of GST, the above limit has been decreased to Rs 20 lakhs in the Special Category States.

  1. Concessions on Intellectual Property: MSME certificate holders or start-ups can get a refund of up to 80% from the government on the patent application. The government also grants Rs 2 lakhs for filing an international patent application. The individual/company gets a rebate of 50% on trademark filing if they possess an MSME certificate. The national patent application is provided with one-time support of Rs 25,000.
  2. Benefits from state government: Most of the states have different schemes to support small businesses. Exemption of sales tax, credit facilities, availability of developed sites for warehouse construction, fiscal help in hire/purchase of machinery, and concessions in electricity bills are some examples.

7. MSME Registration India

The new process of MSME registration known as Udyam Registration began on 1 July 2020. The registration can be done online with just Aadhaar and is based on self-declaration. Permanent Account Number (PAN) and GST linked investments and turnover of the enterprise will be taken automatically from government databases. The system has also been linked with Income Tax and Goods and Services Tax Identification Number (GSTIN).

Businesses that have Entrepreneurs Memorandum Part 2(EM2), Udyog Aadhar Memorandum (UAM), or any other registration issued by an authority under the MSME, will have to re-register themselves. The government has notified as the only government portal for Udyam Registration. The registration is free of cost and paperless. Having a PAN and GST number is all that is needed. After the procedure, a permanent registration number will be generated.

8. Government MSME Schemes For Entrepreneurs

Mr. Nitin Gadkari, the Minister of Micro, Small and Medium Enterprises has launched a website which provides details of various MSME-focused governmental and institutional support and resources on how to set-up and run a sustainable business venture. It is a mentoring platform aimed at aiding the MSME sector to restart business across the country, in the wake of the COVID 19 crisis.

To overcome the Covid-19 crisis and the subsequent lockdown, the government has announced several measures to help the MSMEs. One such initiative announced is the provision of 3 trillion rupees in credit guarantees for the sanction of additional facilities to 4.5 million MSMEs.

9. What Are The Challenges Of MSME?

Despite playing a crucial role in the growth of the country’s economy, there are many Micro and Small Scale Industries lacking technology support for their business activities. The market does not have a single solution for managing cash flows between different legal entities. The awareness about technology among MSMEs is low and few are aware of using it to scale up their business. Also, many MSMEs operate out of Tier 2 and Tier 3 cities where computer skilled manpower is scarce.

Many software companies offer pre-configured packages linked to the size and complexity of the MSME industries. These packages contain solutions for Customer Relationship Management (CRM), digital book-keeping, and ERP and address many business aspects like purchase, production, marketing, invoicing, managing inventory, accounting, and Human Resource Management (HRM). These cloud-based operations offer real-time data into the operations of MSMEs thereby driving profitability, sustainability, and predictability of its business.

10. What Is MSME Training And Why Is It Important?

India is a young nation with over 45 percent of its population within the 25-35 age group. As skill requirement is a prerequisite for starting any micro, small, or medium enterprise, there is a need for a skilled workforce to make the government’s “Make in India/Made in India” campaign successful. The skilled manpower required for the MSME sector by 2022 is projected to be around 150 million.

The government has taken many initiatives in this regard. For example, it has set up the Food Industry Capacity and Skill Initiative (or FICSI) that creates an association of skilled manpower for the food processing industry. MSME sector is considered a key player in the Central Government’s “Make in India” campaign. In fact in the current economic crisis triggered by the COVID 19 pandemic, the government is banking on the MSME segment to be highly instrumental in turning the economy around.

Also read:

  1. Ten Benefits that MSME Can Avail
  2. How to Avail MSME Certificate?
  3. All You Need to Know About Interest Rates on MSME Loan
  4. Are SMEs & MSMEs the same or different? Here's what you need to know.
  5. Labour laws applicable in MSME


Q. What is the meaning of MSME?

Ans- MSME stands for Micro, Small, and Medium Enterprises. According to the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, it is classified into further divisions.

Q. What is MSME example?

Ans- MSME has 2 major sectors which are:

  • Manufacturing Sector
  • Services Sector

Q. What are the types of MSME in India?

Ans- There are 2 divisions of MSME in India:

  • Small Enterprises- Annual turnover between 5 to 75 crores
  • Medium Enterprises- Annual turnover between 75 to 250 crores

Q. What is MSME and how it works?

Ans- MSME was introduced for the welfare of local artisans and workers of India. It provides them with employment opportunities, small business loans, credit limit, funding support and other services. It also provisions enterprises with new age testing facilities and quality certification services.

Q. Who is eligible for MSME loan?

Ans- The eligibility Criteria for MSME / SME Loans are:

  1. Business operating for more than 6 months
  2. A minimum turnover of 90,000 rupees in 3 months
  3. Business shouldn't be under blacklisted/excluded list for SBA finance

Q. What is the process of MSME registration?

Ans- The MSME registration process is simple and neat, follow these steps for a smoother application:

  • Applicant's Aadhar number
  • Full Name and Gender
  • PAN number and email address
  • Registered mobile number of the applicant
  • Location, PAN and organisation's address
  • Opening date and number of employees
  • Bank account number and IFSC code
  • The enterprise's basic business activities

Q. Who is eligible for MSME registration?

Ans- The Udyog Aadhaar registration or Micro, Small & Medium Enterprises (MSME) registration can be availed by numerous business entities like:

  1. Society
  2. Self Help Groups
  3. Proprietorships
  4. Private Limited Company
  5. Limited Liability Partnership
  6. Hindu Undivided Family
  7. Public Limited Company
  8. Partnership Firm

Q. What is the registration fee for MSME?

Ans- The registration fee for MSME is 1,999 Rupees.

Q. How can I get MSME certificate?

Ans- All MSMEs can register on and fill the application form. After the completion of the MSME registration process, you can get your MSME Certificate within 5 working days. This certificate doesn't expire and is applicable for both manufacturing and service sector enterprises.

Q. Is GST registration mandatory for MSME?

Ans- As per the provisions of the Central Goods and Services Tax Act, 2017, the government has exempted the requirement of having GSTIN and relaxed the condition for MSME Udyam Registration.

Q. Is MSME registration mandatory?

Ans- No, an MSME registration is not mandatory but is advised by the Indian government to become a part of it to be eligible for various benefits for their business.

Q. How can I check my MSME registration?

Ans- Follow these steps to Verify Online Udyam No. online:

  • Step 1- Enter your 19 digit Udyam Number
  • Step 2- Enter Valid Verification Code as given in Captcha Image
  • Step 3- Verification Code is case sensitive
  • Step 4- Click on Verify Button
  • Step 5- You're good to go

Q. How do I check my MSME status?

Ans- Follow these steps to Verify Online UAM:

  1. Step 1- Enter 12 digit UAM No.
  2. Step 2- Enter Valid Verification Code as given in Captcha Image
  3. Step 3- Remember the Verification Code is Case Sensitive
  4. Step 4- Click on the Verify button to proceed

Q. Can traders apply MSME registration?

Ans- No traders aren't eligible for MSME registration. Only the manufacturing and service industries are covered by the MSME scheme. No trading companies are covered in this system.

Q. Which bank is best for MSME loan?

Ans- In 2021, these are the best banks with loan interest rates for MSMEs:

  • Kotak Mahindra Bank- 16% onwards
  • UCO Bank- 9.85% onwards
  • Canara Bank Business Loan- 9.20% onwards
  • Bank of Baroda- 9.65% onwards
  • Andhra Bank- 8.20% onwards
  • Bank of Maharashtra- 8.55% onwards
  • Central Bank of India- 7.35% onwards
  • HDFC Bank- 15% onwards
  • IDBI Bank, Indian Overseas Bank, Union Bank of India, Bank of India, ICICI Bank, Punjab National Bank, SBI- Based on the applicant’s profile and business requirements

Q. What are the MSME schemes launched by the Government?

Ans- These are the important MSME schemes launched by the Government:

  1. Women Entrepreneurship
  2. Udyog Aadhaar memorandum
  3. Credit Linked Capital Subsidy Scheme
  4. Quality Management Standards
  5. Quality technology Tools
  6. Incubation
  7. Grievance Monitoring System

Q. Which service sector comes under MSME?

Ans- The Service enterprises falling under the MSME scheme are:

  • Software services
  • Training
  • Education
  • Hotels
  • Restaurants
  • Publishing
  • Hospitals