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What is MSMEs, Eligibility and Classification, Registration, Features, Role of MSMEs in Indian Economy

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What is MSMEs?

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

Micro, small, and medium-sized businesses are known as MSMEs. Manufacturing and service enterprises are two categories of MSMEs that are engaged in the production, processing, and manufacturing of goods and services. Businesses involved in manufacturing produce goods, whereas businesses involved in services deliver services.

Since the introduction of the MSME Development Act (MSMED) in 2006, MSMEs have grown to be a sizeable and crucial component of the economy. MSMEs in India contribute to 48% of the nation’s exports, make up 45% of the manufacturing sector, and produce over 6,000 unique goods. With a 30% GDP contribution, India has the largest MSMEs population in the world after China. In other words, MSMEs support the economy.

They are now the ones who speed up growth. The Ministry of MSME and the Ministry of Agro and Rural Industries joined in 1961, which was the beginning of everything. Following the agricultural sector, MSMEs make a significant contribution to the creation of jobs. About 110 million people are employed by them nationwide, particularly giving rural and underprivileged people possibilities. In India, the rural economy is home to more than 50% of MSMEs.

MSMEs actively encourage innovation and give aspiring business owners excellent possibilities to develop cutting-edge products that boost business expansion and, in turn, the economy.

Eligibility and Classification of MSMEs

 Classification of MSMEs, MSMEs are categorised based on their investment and turnover. The table below lists the new classes under the Aatma Nirbhar Bharat Abhiyan Scheme for 2020:

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

 

MSME Registration

For all currently operating MSMEs in the nation as well as new MSMEs, “Udyam” registration will be required as of July 1, 2020. Online self-registration is possible for this straightforward process. The mandatory document needed to obtain the MSME Udyam registration online is an Aadhaar number.

In the case of a sole proprietorship, the owner’s Aadhaar number would be used (individual). The managing partner’s Aadhaar is necessary for a partnership organisation. Karta must register his or her Aadhaar number in the system for a Hindu Undivided Family (HUF). The authorised signatory’s Aadhaar must be submitted for Limited Liability Partnerships (LLP) and trusts/cooperative societies.

The company (MSME Unit) will be given a “Udyam Registration Certificate” once the online MSME registration process is finished. This certificate has no expiration date. The certificate is valid as long as the company upholds moral principles and is profitable. An online MSME registration has a number of advantages. The certificate is only required for the parent entity where the details would be given if there are several units, plants, or businesses. It is simpler to obtain government contracts after registering and the minimum alternate tax can now be carried over for 15 years (instead of 10 years).

If the investment exceeds the cap set forth in the MSME Act or the company makes any goods that require additional licences, the government has the right to deregister the business (industrial or any statutory license).

Significance and Features of MSME’s

The MSME sector is regarded as the foundation of the Indian economy and has made a significant contribution to the growth of the country’s economy. It helps to develop rural and underdeveloped areas and provides employment opportunities. There are over 6.3 crore MSMEs in India.

They are also seen as a viable source of income for those wishing to enter the manufacturing sector because of the following qualities.

Indian products’ potential for export and export promotion

  • Funding – Finance & Subsidies
  • Government’s Promotion and Support
  • Growth in demand in the domestic market
  • Less Capital required
  • Manpower Training
  • Project Profiles
  • Raw Material and Machinery Procurement

Role of MSMEs in Indian Economy

MSMEs account for more than 29% of the GDP and 50% of all exports from the nation. Additionally, they are responsible for 30% of India’s manufacturing production. More than 11 crore people are employed by MSMEs, and in the upcoming years, it is intended to increase this number to 15 crore.

Since the introduction of the MSME Development Act (MSMED) in 2006, MSMEs have grown to be a sizeable and crucial component of the economy. MSMEs in India contribute to 48% of the nation’s exports, make up 45% of the manufacturing sector, and produce over 6,000 unique goods. With a 30% GDP contribution, India has the largest MSMEs population in the world after China. In other words, MSMEs support the economy.

They are now the ones who speed up growth. The Ministry of MSME and the Ministry of Agro and Rural Industries joined in 1961, which was the beginning of everything. Following the agricultural sector, MSMEs make a significant contribution to the creation of jobs. About 110 million people are employed by them nationwide, particularly giving rural and underprivileged people possibilities. In India, the rural economy is home to more than 50% of MSMEs.

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