A nano enterprise in India is typically referred to as a business that is smaller than micro-enterprises. Though not officially recognized as a formal category under the Micro, Small, and Medium Enterprises (MSME) classification, nano enterprises are often used in colloquial terms to describe businesses with very limited resources, few employees, and minimal turnover.
Importantly, the term is often used in the context of self-employed individuals, small traders, local service providers, or very small units with limited capital and operations.
Under the MSME Development Act of 2006, the classification for enterprises is based on investment in plant, machinery, or equipment, and their annual turnover. However, the act doesn’t specifically define nano enterprises.
For context, micro enterprises are classified in India with investments up to Rs 1 crore and turnover up to Rs 5 crore.
Hence, a nano enterprise is informally understood by industry experts as a business operating typically with a turnover of less than Rs 1 crore annually even as there is no official turnover criterion for nano enterprises under the MSME Act.
For instance, according to a March 2024 report on credit access for nano enterprises conducted by LEAD at Krea University, “Nano enterprises can be classified as a distinct segment within the MSMEs as firms with an annual turnover between Rs 10 lakh and Rs 1 crore characterized by their hyperlocal roots and focus.”
Moreover, more than 96 per cent of India’s microenterprises operate with an annual turnover of less than Rs one crore, according to the report. Currently, India has 4.97 crore micro enterprises registered with the MSME Ministry, as per data from the Udyam portal.
To address the unique challenges faced by nano enterprises, the report suggested reclassifying the micro segment into distinct categories of nano from within the micro enterprises.
Another report by DeAsra Foundation, a non-profit entity set up by Persistent Systems’ Anand Deshpande and his family in July 2022 had noted that nano enterprises deserve a special policy category and treatment.
“The foremost need is to recognize, define and carefully create a policy structure enabling nano enterprises to sustain and grow. The new classification we believe will aid in the development of nano-specific policies that may have better efficacy,” the report had noted.
Importantly, in a Rajya Sabha question on February 5 this year about whether the government is aware of the demand for re-categorisation of MSMEs to include nano-enterprises as a separate category, former minister of state in the MSME Ministry Bhanu Pratap Singh Verma had noted that no demand for re-categorisation of MSMEs has been received in the MSME ministry.