Nirmala Sitharaman gives MSMEs enormous headroom to grow bigger with revised definition

By: |
Updated: May 13, 2020 8:14 PM

Ease of Doing Business for MSMEs: With the revised definition, combining manufacturing and service MSMEs to enjoy the same benefits, investment less than Rs 1 crore and turnover under Rs 5 crore will be defined as micro-units.

finance minister nirmala sitharaman, FM sitharaman press conference, economic package 2.0, Rs 20 lakh croreFM Sitharaman said that the definition is being revised for MSMEs benefit as there was a fear that if they outgrow size, they’ll lose benefits they get.

Ease of Doing Business for MSMEs: Finance Minister Nirmala Sitharaman on Wednesday revised the MSME definition from investment in plant and machinery or equipment based to a mix of investment and turnover. Manufacturing enterprises investing less than Rs 25 lakh, less than Rs 5 crore, and less than Rs 10 crore in plant and machinery or equipment were till now defined as micro, small and medium enterprises respectively. For services businesses, the investment threshold limit stood at less than Rs 10 lakh, less than Rs 2 crore and less than Rs 5 crore as micro, small and medium enterprises respectively. Now, with the revised definition, combining manufacturing and service MSMEs to enjoy same benefits, investment less than Rs 1 crore and turnover under Rs 5 crore will be defined as micro-units while small businesses will be categorized based on investment less than Rs 10 crore and turnover under Rs 50 crore. Medium enterprises will be defined on the basis of investment under Rs 20 crore and turnover less than Rs 100 crore.

“They (government) should have increased the turnover limit for medium enterprises to at least Rs 250 crore. When we talk about global markets, competitiveness or partnering with global businesses, then Rs 100 crore turnover is too less to win the world market. Similarly for small businesses the turnover limit should have been Rs 75-100 crore while for micro-enterprises, the government should have kept it between Rs 5-10 crore,” Chandrakant Salunkhe, Founder and President, SME Chamber of India.

Also read: Getting loans for MSMEs made easier: FM Sitharaman announces Rs 3 lakh crore collateral free loans

Nirmala Sitharaman was addressing a press conference to share details for the Rs 20 lakh crore economic package announced by Prime Minister Narendra Modi on Tuesday evening. “Some of the startups which have taken off could also fulfil the proposed definition of MSME and thereby benefit from the liquidity provision by the Central Government,” Pranay Bhatia, Partner and Leader, Tax & Regulatory Services, BDO India told Financial Express Online.

The minister said that the definition is being revised for their benefit as there was a fear that if MSMEs outgrow size, they’ll lose benefits they get. Hence, with increased investment limit, more enterprises can still be defined as MSMEs and will be able to get existing benefits. “The inclusion of turnover will give a realistic measure for banks and financial institutions to assess that entity and lead to cheaper and less cumbersome access to credit,” Atul Pandey, Partner, Khaitan & Co told Financial Express Online. The need for reclassification exercise was “to widen the ambit for more and more players and encourage domestic small scale industry and gear it towards becoming a global behemoth,” he added.

“This is a good start though. The government might look at revising the limit ahead based on how this pans out even as we can expect a lot of changes in the global supply chain in the post Covid scenario. You cannot rule out that. India has a good chance of being competitive,” Kavita Chacko, Senior Economist, CARE Ratings told Financial Express Online.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Covid blues shake off: More small businesses may employ people in Q3 as intent to hire doubles from H1
2LambdaTest raises $6 million from Sequoia Capital India’s Surge, others
3Digital payments skyrocket as India steps into Unlock phase; UPI payments value surges 99% in Q2