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The government releases revised standards for classifying MSMEs

The government has announced significant changes to the turnover and investment requirements for classifying Micro, Small, and Medium-Sized Enterprises (MSMEs), which will go into effect on April 1

Deeksha Upadhyay 26 March 2025 15:46

The government releases revised standards for classifying MSMEs

The significance of vibrant and dynamic MSMEs India's social and economic progress depends on MSMEs, which have grown over the previous 50 years.

Employment: Second only to agriculture, it generates jobs for 24.14 crore people. About 40% of the 6.13 crore registered MSMEs are owned by women.

Accessory role: By serving as auxiliary units and bolstering major industries, it promotes inclusive industrial growth.

Rural Reach: Assists in the industrialization of rural and impoverished areas, thereby reducing regional disparities.

Global Footprint: Provides both domestic and international customers with a large range of products and services.

Self-Reliance Mission: With over 6 crore enterprises, MSMEs play a crucial role in building a strong, independent India.

Obstacles MSMEs Face: Limited Financial Access Because they lack collateral, a formal credit history, or sufficient documentation, many MSMEs find it difficult to secure bank loans.For example, according to SIDBI data, only sixteen percent of MSMEs obtain formal credit, with the remaining ones relying on unofficial lending sources or higher-interest non-banking financial companies (NBFCs).

Low Technology Adoption: Many MSMEs still use antiquated equipment, which limits their output, quality, and expansion prospects. For instance, the majority of Surat's textile MSMEs use traditional looms, which limits their ability to compete with Chinese producers.

Restricted Market Access and Exports: While MSMEs make up 48% of India's exports, very few of them export directly.

For example, Rajasthani handicraft MSMEs usually do not have access to internet resources or the export permits they need to reach a global audience.

Labor Issues and Skill Shortage: A FICCI survey found that more than 70% of MSMEs have trouble finding qualified workers.

Buyers' Delayed Payments: Bigger companies frequently delay payments, which has a negative impact on MSMEs' cash flow.

For instance, payment delays of three to six months are common for MSMEs that supply government public sector undertakings (PSUs), which throws off their working capital cycles.

MSMEs are supported by the Udyam Registration Portal, an easy-to-use online tool that makes it easier for MSME registration, grants a unique identification number, and improves access to a range of government programs.

Public Procurement Policy for MSEs: This policy mandates that a predetermined proportion of purchases made by PSUs and government ministries come from micro and small businesses (MSEs).

Program for Entrepreneurship and Skill Development (ESDP): A variety of training programs are available through this initiative with the goal of encouraging entrepreneurship and improving MSMEs-relevant skills.

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) offers MSMEs loans up to ₹5 crore without collateral; the guarantee coverage varies based on the loan amount and borrower type.

PMMY, or Pradhan Mantri Mudra Yojana: This program provides small and micro-businesses that are not corporations or farms with loans up to ₹10 lakh. They are divided into two groups: "Shishu" for loans up to ₹50,000 and "Kishore" for loans over ₹50,000.

Funding Plan for Traditional Industry Regeneration (SFURTI): By assembling traditional craftspeople into clusters, this initiative seeks to increase their competitiveness and guarantee long-term job prospects.

PM Vishwakarma: This program offers a wide range of assistance to artisans and craftspeople, with a focus on developing skills, supplying toolkits, granting credit, and creating connections with markets.

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