Q.Briefly explain the composite criteria used to classify an enterprise as micro, small or medium under the MSME Development Act (as revised with effect from 1 July 2020).

MSME classification since 1 July 2020 no longer depends on a single figure — it depends on two figures checked together.

With effect from 1 July 2020, the Government of India revised the basis on which MSMEs are classified, moving to a composite criterion that considers two measures together rather than investment alone. Under this criterion, a unit's category is decided jointly by (a) its investment in plant and machinery or equipment, and (b) its annual turnover, and the unit must satisfy BOTH limits of a given category to be classified in it; crossing even one limit pushes it into the next higher category. The revised limits, applicable uniformly to both manufacturing and service enterprises, are: a Micro Enterprise has investment not more than ₹1 crore and turnover not more than ₹5 crore; a Small Enterprise has investment not more than ₹10 crore and turnover not more than ₹50 crore; and a Medium Enterprise has investment not more than ₹50 crore and turnover not more than ₹250 crore. This composite approach gives a more complete picture of an enterprise's actual size than investment alone would, and it determines which enterprises are eligible for MSME-specific government support and benefits.

A frequent error is stating only the investment limits and omitting the turnover limits, or vice versa, which misses the whole point of the term 'composite' — both figures must be quoted and both must be satisfied together.