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By Pine Labs | August 01, 2022
Micro, Small and Medium Enterprises (MSMEs) have the potential to be key employment generators and help achieve the goal of taking the Indian economy to US$ 5 trillion in the next five years. Most companies are now looking to create solutions with new and emerging technologies in this high-growth sector. The MSMEs sector supplies goods and services to large industries and is the backbone of exports from India. As the MSME full form suggests, it covers different types of enterprises based on their size - micro, small and medium. India has more than nine crore MSMEs, accounting for nearly 40% of the exports from India.
The pandemic has pushed MSMEs to digitise. Innovative FinTech solutions can be the key to taking MSMEs to the next level and help India become a global economic powerhouse.
MSMEs have their own set of challenges to their growth journey. One of these is the timely availability of required funds. 80% of MSMEs lack access to formal lending channels. The need for credit is more during seasonal spikes, like festive seasons. Small companies in retail sectors need to be prepared to take growth advantages during important festive seasons as consumers look for high-value purchases.
Let us understand more about MSMEs.
MSMEs were introduced under the MSMED (Micro, Small and Medium Enterprises Development) Act, 2006. The full form of MSME is Micro, Small, and Medium Enterprises.
Key Features:
As the above MSME definition shows, MSMEs are primarily involved in producing, manufacturing, processing, or preserving goods. For more clarity on 'What is MSME?', consider the following essential elements of MSMEs -
Addition Under MSMEs
Detailed guidelines on MSMEs are updated intermittently. The Indian government has redefined MSMEs in the Atmanirbhar Bharat package after 14 years since the MSME Development Act, 2006. The primary objective of refining the MSMEs was to ease business activities, attract more investments, and create more employment in the MSME sector.
As per the new definition of MSME, the Ministry of MSME now includes both retail and wholesale trade under MSME to strengthen the sector and boost economic growth. With such inclusions under MSME, the ministry was intended for the limited purpose of Priority Sector Lending from banks under the regulations of the Reserve Bank of India (RBI).
As part of the Aatmanirbhar Bharat stimulus package, the government launched some policies to help entrepreneurs to fight against the ongoing pandemic. One of the changes in supporting entrepreneurs was a new MSME definition. It helps avail many benefits that will aid MSMEs to grow significantly.
Revised MSME Limits
Classification based on the Composite MSME Criteria and Limits or MSME definition 2022 - Investment in Plant and Machinery/Equipment and Annual Turnover - are as follows:
MSME Classification
Enterprises in manufacturing and Services Segments
Micro
Investment: Less than INR 1 Crore
Turnover: Less than INR 5 Crores
Small
Investment: Should not exceed INR 10 Crores
Turnover: Should not exceed INR 50 Crores
Medium
Investment: Should not exceed INR 50 Crores
Turnover: Should not exceed INR 250 Crores
These new classifications and limits have been revolutionary for the Indian business ecosystem. With these new changes per the MSME definition 2022, there would be no need for regular checks for the required investments in the plant and machinery. Also, there will be more transparency, non-discriminatory, and objectivity in the operations of MSMEs.
The MSME Industry in India is contributing to socio-economic development impressively. Therefore, the Indian government is encouraging MSMEs promotion.
Reputed FinTech companies like Pine Labs can help MSMEs accelerate commerce. They provide advanced FinTech solutions, like 360-degree Payments Solutions. MSMEs can access a quick and secure online payment gateway to upgrade their customer experience digitally.
The government keeps encouraging the sector with its various recent developments and policies. As of July 8, 2022, the government has disbursed Rs. 73,199.89 crores for 10.03 million loans under the Pradhan Mantri MUDRA Yojana (PMMY) scheme. The government aims to invest more in back-end services to improve the sector's performance.
MSMEs are classified into two categories, as per MSMED Act, 2006:
These enterprises can be registered on the Udhyam portal under micro, small or medium categories. They should match the composite criteria of equipment investment and turnover for MSME classification.
Udyog Aadhaar Memorandum (UAM) number is issued to certified micro/small/medium enterprises.
Now MSMEs need not refrain from tapping into the beneficial government schemes. Many enterprises in India are not registered due to the hassles of lengthy paperwork. As a solution, the government has come up with this simplified process. UAM registration saves you from the previous lengthy self-certification process of the MSMEs. The registration process is entirely paperless and can be completed online.
Post-completion, the applicant is allotted a unique Udyog Aadhaar Number (UAN). Udyog Aadhaar Number (UAN) is required to register for MSME scheme benefits. However, the UAM is not mandatory for all MSMEs.
Currently, entrepreneurs with UAM must migrate to Udyam Registration to benefit from various MSME schemes. The last date for this was June 30, 2022. If you have not migrated to Udyam Registration, you must re-register under Udyam Portal to get MSMEs benefits.
Udyam Registration entitles your business to the following benefits:
Complex documentation processes, unavailability of collateral, and lack of credit history can play a big role in getting credit rejection through conventional lending mediums. FlexiCredit business loans offer you funds with no documentation and no-collateral facility. You have the flexibility to withdraw whenever required and pay interest on the portion of the loan you use.
For technological updates, automation, and credit solutions, MSMEs can get support from numerous reputed FinTech companies, like Pine Labs, serving big brands across industries.
Thus, FinTech companies are pioneers and have tailored effective financial and digital solutions to help MSMEs reach their full potential to support the economy.
MSME Meaning: MSME stands for Micro, small & medium enterprises. As per the MSMED Act of 2006, these companies are involved in the manufacturing and services sectors in the economy where the machinery & plant/equipment funding and annual turnover must be as per the defined limits.
Earlier, the MSME criteria for manufacturing units and service enterprises were different. Now Manufacturing and Service enterprises are not differentiated for MSMEs classification.
Earlier, MSMEs were based on investments. Now the new MSMEs definition also includes the annual turnover of the company.
According to the Ministry of MSME, there are more than nine crores of MSMEs in India, which account for 1/3rd of India's GDP. 1.5 crores of 9 crores MSMEs are registered under GST. There is room for an increase in MSME numbers in the coming years with easy Udyam Registration.
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