Micro, small, and medium enterprises (MSMEs) are the backbone of the Indian economy, contributing 30% to GDP. They employ over 11 crore people. The MSME ministry aims to increase MSME contribution to GDP to 50% by 2025. New definitions classify micro, small, and medium enterprises based on investment and turnover limits. Several policies support MSMEs, including credit guarantee schemes, public procurement policies, and cluster development programs. Trade receivable discounting systems and startup funding schemes also aid MSME growth and development.

1. MSMEs
Medium, Small and Medium Enterprises

2. Definition
Micro, Small and Medium Enterprises are better known by the acronym MSME. MSMEs are the backbone of
the Indian economy. Silently operating in different areas across the country, more than 6 crore MSMEs have a
crucial role to play in building a stronger and self-reliant India. These small economic engines have a huge
impact on the country’s GDP.
MSMEs contribute a staggering 30% to the country’s GDP, and around 45% of the manufacturing output, and
approximately 48% of the country’s exports. Additionally, more than 11 crore people are employed in the
MSME sector. They’re rightly referred to as the ‘Backbone of the country.’
The MSME ministry in order to strengthen the backbone of the country targets to increase its contribution
towards GDP by up to 50% by 2025 as India moves ahead to become a $5 trillion economy.

3. New Definition of MSMEs (wef 1 July 2020)
Category Investment limit (in Rs.) Turnover limit (in Rs.)
Micro 1 crore 5 crore
Small 10 crore 50 crore
Medium 50 crore 250 crore

4. Policies related to MSMEs
Credit Guarantee Scheme for Micro and Small Enterprises :
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by the
Government of India (GoI) to make available collateral-free credit to the micro and small enterprise
sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The
Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India
(SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises
(CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.

5. The objective of Policy is promotion and development of Micro and Small Enterprises by supporting them
in marketing of products produced and services rendered by them. However, the policy rests upon core
principle of competitiveness, adhering to sound procurement practices and execution of supplies in
accordance with a system which is fair, equitable, transparent, competitive and cost effective.
Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2018 :
Micro & Small Enterprises - Cluster Development Programme (MSE-CDP) :
The Ministry of Micro, Small and Medium Enterprises (MSME), Government of India (GoI) has adopted the
Cluster Development approach as a key strategy for enhancing the productivity and competitiveness as well
as capacity building of Micro and Small Enterprises (MSEs) and their collectives in the country. A cluster is a
group of enterprises located within an identifiable and as far as practicable, contiguous area or a value chain
that goes beyond a geographical area and producing same/similar products/complementary
products/services, which can be linked together by common physical infrastructure facilities that help address
their common challenges. The essential characteristics of enterprises in a cluster are (a) Similarity or
complementarity in the methods of production, quality control & testing, energy consumption, pollution
control, etc., (b) Similar level of technology & marketing strategies/practices, (c) Similar channels for
communication among the members of the cluster, (d) Common market & skill needs and/or (e) Common
challenges & opportunities that the cluster faces.

6. TReDS?
TReDS?
Trade Receivable e discounting system (TReDS) :
It is an institutional mechanism set up in order to facilitate the discounting of invoices for MSMEs from corporate
buyers through multiple financiers. Invoice discounting on TReDS involves three participants MSME Supplier,
Corporate Buyer and Financier. The invoice is uploaded by either buyer or supplier depending on the method of
discounting and is approved by the other party. Once the invoice is approved the financiers on the platform start
to bid on the invoice. The supplier accepts the bid and the discounted amount is credited in its account in T+1
day, where T is the day of acceptance.
Stand Up India Scheme :
Stand Up India Scheme facilitate bank loans between 10 lakh and 1 crore to atleast one scheduled caste (SC) or
Scehduled Tribe, borrower and atleast one women per bank branch for setting up a greenfield enterprise. This
enterprise may be in manufacturing, services or the trading sector. In case of non-individual enterprises at least
51% of the shareholding and controlling stake should be held by either an SC/ST or Woman entrepreneur

7. Some other Schemes for SMSEs :
 Udyog Aadhar Memorandum
 Psbloanin59min
 Zero defect zero effect scheme
 MSME total rooms Scheme
 International Cooperation Scheme
 Funds of Funds Scheme by SIDBI
 Prime Minister Employment Generation Scheme
Organizations for development of MSMEs :
• Office of Development Commissioner (MSME)
• Khadi Village Industries Commission (KVIC)
• Coir Board
• National Small Industries Corporation Limited (NSIC)
• National Institute for micro, Small and Medium Enterprises (NIMSME)
• Mahatma Gandhi Institute of Rural Industrailisation (MGIRI)