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UPSC CURRENT AFFAIRS – 25th March 2025

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Govt notifies revisions to investment, turnover criteria for MSMEs

Govt notifies revisions to investment, turnover criteria for MSMEs

Why in News?

The government has revised the classification criteria for Micro, Small, and Medium Enterprises (MSMEs) by increasing the investment and turnover limits, effective from April 1, 2025.

Govt notifies revisions to investment, turnover criteria for MSMEs

Background

  • In a bid to support the growth and development of Micro, Small, and Medium Enterprises (MSMEs), the government has announced significant revisions to the classification criteria based on investment and turnover.
  • These revisions, set to come into effect from April 1, 2025, will enhance the ease of doing business and broaden the scope of MSMEs eligible for various benefits.

What are MSMEs?

  • MSMEs (Micro, Small, and Medium Enterprises) are businesses involved in the production, processing, and preservation of goods and services.
  • They are classified based on their investment in plant machinery or equipment and annual turnover.

MSME Regulation in India:

  • The Ministry of Micro, Small, and Medium Enterprises (MSME) was formed in 2007 by merging the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries.
  • The Micro, Small, and Medium Enterprises Development Act of 2006 addresses issues affecting MSMEs and enhances their competitiveness through a National Board for MSMEs.

Key Revisions

  • Micro Enterprises:
    • Investment: The investment limit for micro-enterprises has been revised from ₹1 crore to ₹2.5 crore.
    • Turnover: The turnover limit has also been increased from ₹5 crore to ₹10 crore.
  • Small Enterprises:
    • Investment: The threshold for investment in small enterprises has been raised from ₹10 crore to ₹25 crore.
    • Turnover: The turnover limit has been doubled from ₹50 crore to ₹100 crore.
  • Medium Enterprises:
    • Investment: The investment ceiling for medium enterprises has been revised from ₹50 crore to ₹125 crore.
    • Turnover: The turnover limit has been increased from ₹250 crore to ₹500 crore.

Background and Rationale

  • These revisions are part of the government’s ongoing efforts to provide better access to funding and growth opportunities for MSMEs, which are vital for India’s economic development.
  • The Union Finance Minister Nirmala Sitharaman, during her budget speech, had announced the increase in the investment and turnover limits for MSMEs, with the new criteria being 5 times and 2 times higher than the previous ones, respectively.
  • This change is expected to make a large number of enterprises eligible for MSME benefits, including subsidies, credit facilities, and procurement opportunities from the government.
  • The new thresholds are also aimed at enabling MSMEs to expand their operations and achieve economies of scale, thereby contributing more significantly to employment generation and economic growth.
  • Additionally, this classification aligns with the government’s vision of making MSMEs more competitive and resilient in the global market.

Implications

  • Increased Access to Government Schemes: With the increase in classification limits, more enterprises will now qualify for government schemes designed to support MSMEs.
  • Promoting Growth and Expansion: By broadening the classification, businesses can now grow without the fear of losing MSME status, encouraging them to scale up operations and invest in innovation.
  • Improved Credit Flow: As more enterprises are classified under MSMEs, they will have better access to credit facilities, both from public and private financial institutions.

Key Government Initiatives:

  • Pradhan Mantri MUDRA Yojana: Provides loans up to ₹10 lakh for non-corporate, non-farm enterprises.
  • Credit Guarantee Schemes: Offers credit support through the Credit Guarantee Fund Trust for MSMEs.
  • MSME SAMADHAAN: An online system for resolving delayed payment issues.
  • Government e-Marketplace (GeM): Facilitates public procurement from MSMEs.
  • Udyam Registration: A simple online registration process for availing government benefits.
  • CHAMPIONS Portal: Helps MSMEs improve and grow globally through guidance and support.

Major Challenges Faced by MSMEs:

  • Limited Access to Finance: Despite schemes like Mudra loans, obtaining credit remains difficult due to perceived high-risk factors.
  • Delayed Payments: Payments from larger enterprises or government agencies often arrive late, affecting cash flow.
  • Skilled Workforce Shortage: MSMEs struggle to find skilled labor for modern machinery and technology.
  • Limited Branding and Outreach: Lack of resources to market products and build brand awareness, making it hard to compete with larger companies.
  • Infrastructure Constraints: Poor infrastructure, such as unreliable power and road connectivity, hinders growth and efficiency.

Conclusion

  • The revised classification criteria mark a significant step in facilitating the growth of MSMEs, recognizing their contribution to the economy and enabling them to access resources and opportunities more effectively.
  • The revisions will likely have a positive impact on employment, innovation, and India’s overall business ecosystem, fostering a more robust and competitive MSME sector.

One Response

  1. Pingback: Parliamentary panel flags issues faced by MSMEs, exporters under GST - JICE IAS

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