Micro, Small and Medium Enterprises

To understand MSMEs, it helps to know how 'size' is defined for enterprises in India. Several parameters can measure the size of a business unit — the number of persons employed, the capital invested, or the turnover of the business.

How India defines size

• The Government of India defines MSMEs on the basis of investment in plant and machinery and turnover.
• This measure deliberately suits India's socio-economic setting, where capital is scarce and labour is abundant.

The three types of units

• Micro Enterprises — investment in plant and machinery up to 1 crore, and turnover not exceeding 5 crore.
• Small Enterprises — investment up to 10 crore, and turnover not exceeding 50 crore.
• Medium Enterprises — investment up to 50 crore, and turnover not exceeding 250 crore.

Share of MSMEs by type

The overwhelming majority of MSMEs are micro units: about 99.4% are micro enterprises, roughly 0.52% are small enterprises, and only about 0.1% are medium enterprises.

Related traditional categories

• Village Industries — an industry located in a rural area that produces goods or renders services, with or without the use of power, and in which the fixed capital investment per head (per artisan or worker) is specified by the central government from time to time.
• Cottage Industries — also called rural or traditional industries. Unlike other small-scale industries, they are not defined by a capital-investment criterion.

The MSMED Act, 2006 …