Introduction
Imagine walking into your favorite local shop—the one that always has just what you need, from handmade crafts to everyday essentials. Behind that small storefront, is an MSME. Micro, Small, and Medium Enterprises or MSMEs, in short, are the businesses that create, process, or store goods and commodities. MSME was first introduced by the Government of India. It derived from the MSMED (Micro, Small, and Medium Enterprises Development) Act of 2006.
The MSME sector is an important pillar of Indian economy. It helps the country grow with a network of almost 30 million businesses and giving jobs to about 70 million people. This sector makes over 6,000 different products and is responsible for 45% of the goods manufactured in India. It also helps with exports, contributing 40% through both direct and indirect efforts.
Brief History of MSME
The Ministry of Small Scale Industries and Agro and Rural Industries (now MSME) was created in October 1999. In September 2001, it was split into two separate ministries: the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries.
Later, on May 9, 2007, these two ministries were merged again to form the Ministry of Micro, Small, and Medium Enterprises (MSME). This change happened due to updates in the Government of India (Allocation of Business) Rules, 1961.
MSME Mission and Objective
The mission of MSME Ministry is to promote the growth and development of MSMEs, including Khadi, Village, and Coir industries, to create new enterprises and more employment opportunities. And the objective is to enhance the manufacturing base in the country by improving the performance of MSMEs through skill and entrepreneurship development. To support MSMEs and help them scale up, this Ministry now sets policies, promotes programs, projects, and schemes, and supervises their execution.
MSME Classification
MSMEs are classified based on their annual turnover and investment in plant and equipment for both goods and services enterprises.
| Classification | Investment in Plant & Machinery or Equipment (in INR) | Annual Turnover (in INR) |
|---|---|---|
| Micro Enterprise | ≤ 1 crore | ≤ 5 crores |
| Small Enterprise | ≤ 10 crores | ≤ 50 crores |
| Medium Enterprise | ≤ 50 crores | ≤ 250 crores |
MSME Schemes
Every year, the Indian government rolls out several MSME schemes.
Every year, the Indian government rolls out several MSME schemes.
Following is a list of prominent MSME initiatives:
-
- Prime Minister’s Employment Generation Programme (PMEGP)
Prime Minister’s Employment Generation Programme aims to create sustainable jobs in rural and urban areas by providing financial support for setting up self-employment ventures. It focuses on offering stable work opportunities for unemployed youth in rural areas and supporting traditional artisans to prevent them from leaving their occupations. - Credit Guarantee Scheme for Micro & Small Enterprises (CGTMSE)
This program helps people starting their first business by making it easier to get loans. It gives support so they don’t need to offer any property or someone else’s guarantee to borrow money. This is especially helpful for small businesses that don’t have anything to use as a backup for loans. - Micro & Small Enterprises Cluster Development Programme (MSE-CDP) Scheme
This program helps small businesses grow and do well. It focuses on improving things like technology, skills, and helping businesses sell their products. It also helps build or fix places where these businesses work, like factories or groups of businesses. Plus, it teaches them how to work in ways that are good for the environment and can last a long time.
- Prime Minister’s Employment Generation Programme (PMEGP)
Digital MSME
The “Digital MSME” Scheme helps small businesses use digital tools and technology to make their work better and faster. It teaches them how to use computers, apps, and other digital methods to improve how they make things and run their business. This helps them compete with other businesses in India and around the world. It also supports the government’s goal of getting more people to use digital payments.
MSME Registration
Only businesses that make products or offer services can register as MSMEs. If they meet the rules, they can sign up easily through the MSMEs’ single window registration system.
Applying for Udyog Aadhaar or MSME registration is open to any manufacturer or service provider business that meets the requirements for yearly turnover and investment in machinery and equipment. Proprietorships, Hindu Undivided Families, Partnership Firms, One Person Companies, Limited Liability Partnerships, Private Limited Companies, Limited Companies, any association of Persons, Co-operative Societies, Trusts, or any other organisation may register as MSMEs in India.
How to Apply for MSME?
To register, follow the steps outlined below carefully. Once you finish, the government will check the information you provided. After everything is verified, they will send your e-registration document to your email.
To begin the registration procedure, go to the Udyog Aadhaar website UDAYAM Registration Image 1
Choose “For New Entrepreneurs who are not Registered yet as MSME” from the menu When redirected to the next page, enter your Aadhaar information and select “Validate & Generate OTP”
UDAYAM Registration Image 2
UDAYAM Registration Image 2
To validate the Aadhaar information, enter the OTP that gets issued to the registered cellphone number
Then, enter your PAN number and click “Validate” after choosing the type of business
UDAYAM Registration Image 3
Then, enter your PAN number and click “Validate” after choosing the type of business
UDAYAM Registration Image 3
Enter the necessary information in all the fields that are mandatory UDAYAM Registration Image 4
Click the “I agree” box to submit the form and authenticate it with an OTP The MSME department will review all of your credentials after you submit the form, and three days later they will issue you the MSME certificate, which you may download from their website. MSME registration
The documents required for MSME registration are
The documents required for MSME registration are
- Address proof of the business
- Copy of the buy and sales invoice book
- Receipts and bills for purchase of equipment or machinery
- Copy of the trade license
Aadhaar ID - PAN card
- Bank Account Number
- IFSC Code
- NIC Code
- Employee information, if any
- Number of Employees
- Commencement date for Business
- In the case of a partnership firm, partnership details
- GSTIN certificate
- Partnership deed for an unregistered partnership
- Registered Partnership firm: Registration certificate
Memorandum of Association (MoA) - Articles of Association (ADA)
- Certificate of Incorporation
- Copy of the resolution passed in a general meeting of the company
- Copy of board resolution with an authorisation from a director to sign and apply for the MSME application
Future of MSME
MSME growth in India has been remarkable. By March 24, 2022, 7,870,246 MSMEs had registered on the Udyam Registration portal
Out of these, most were micro-enterprises, totaling 7,485,412 (95.11%). Small enterprises made up 349,129 (4.44%), and midsized enterprises were 35,705 (0.45%). Overall, India had 6.3 crore MSMEs.
A modern MSME framework that aligns with global standards, emerging industry opportunities, and India’s key socioeconomic goals can drive growth, innovation, and productivity. This approach can also help MSMEs strengthen their position in the global market.
Experts believe the MSME sector can play a vital role in achieving the National Manufacturing Policy’s target of having manufacturing contribute 25% to India’s GDP.
MSMEs can also collaborate with banks and brands to grow by using tools like Innoviti’s POS machines, which make transactions and partnerships easier.
Conclusion
The MSME sector is a key part of India’s economy. It plays an important role in the country’s growth by boosting exports and creating many jobs for unskilled workers, recent graduates, and underemployed people. It also helps banks provide more credit to businesses in this sector. To keep this industry strong, the government should focus on making MSME registration more relevant by improving laws and helping financial institutions offer more loans at lower interest rates. Innoviti supports SMEs with digital payment solutions. One of their new offerings includes an online payment system using EMI wallets, which helps businesses manage their cash flow and run reward programs effectively.