importance of msme

What is MSME? Full Form, Meaning, Features and Importance in India

December 01, 2022 • 16796 views

The Micro, Small, and Medium-sized Enterprises (MSMEs) sector in India is one of the key contributors to the country’s GDP. The importance of MSMEs in India is evident in terms of entrepreneurial development and employment generation in the country. From cities to rural and semi-rural areas, MSMEs in India can be found in every corner of the country today. 

According to statistics published by the India Brand Equity Foundation (IBEF), the loan disbursal for MSMEs stood at Rs. 9.5 Trillion in 2021, which was 40% more than the year 2020. In addition to this, the budget allocation by the Indian government for MSMEs doubled to Rs. 15,700 Crore in 2022. 
As MSMEs are emerging as a crucial aspect of the Indian economy, let's understand what MSMEs are, their features, and their scope in India. 

What is Meant by MSME?

To start with, let's first understand What is MSME? MSME Full Form - MSME stands for Micro, Small, and Medium Enterprises, which are basically small businesses in India. To be considered as an MSME, that small business should have an annual turnover of up to ?5 Crore. The objective of MSMEs in India is primarily to focus on the areas like manufacturing, processing, production, or preservation of goods and commodities.

The Union Ministry of Micro, Small and Medium Enterprises (M/o MSMEs) has issued a Gazette notification to pave the way for the implementation of the upward revision in the definition and criteria of MSMEs in the country. The new definition and criterion came into effect on 1st July 2020, the MSMEs are classified as manufacturing and service-providing enterprises based on investment and annual turnover as mentioned in the below table.

Size of the Enterprise


Annual Turnover


Up to Rs.1 Crore

Up to Rs.5 Crore


Up to Rs.10 Crore

Up to Rs.50 Crore


Up to Rs.50 Crore

Up to Rs.250 Crore


Also Read: A Guide To Apply for MSME Loan Online

Apply for Business Loan

Importance and Features of MSMEs

The MSME sector is contributing substantially to the development of the nation. Currently, India has more than 6.3 crore MSMEs. These enterprises are considered the backbone of the Indian economy and a lucrative source of income for small business owners and beginners who wish to venture into the manufacturing or services sector.

Some features of MSMEs include:

  • Funding availed through finance and subsidies
  • Less capital requirement
  • High demand in local and rural markets
  • Manpower training
  • Job creation

How to Avail of MSME Loans?

Even though MSMEs are thriving in India, some business owners still struggle to find adequate finances for their businesses. To tackle this problem, the government has also launched various schemes and benefits for MSMEs. Besides this, many financial institutions are offering financial products to assist small and medium business owners.

Non-Banking Financial Companies (NBFCs) such as Poonawalla Fincorp have curated a wide range of offerings for small and medium enterprises. These products include Business Loans for Working Capital, Business Loans for MSMEs, and Business Loans for Proprietorship.

By availing of an MSME loan, business owners can have full control over their finances and can meet long-term and short-term expenses. They can use the funds to infuse working capital, hire staff, expand services, improve product portfolios, and procure advanced machinery and high-quality raw material.

Get Business Loans for MSMEs with Minimal Documentation from Poonawalla Fincrop

At Poonawalla Fincorp, we understand the importance of adequate funding for MSMEs. We offer unsecured Business Loans for MSMEs through our simple online application process. We only require minimal documentation to approve your loan. Our loans are available at competitive interest rates, and flexible loan tenure and are disbursed quickly.


We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Business Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

Trending Topics

Contact Us logo Quick Apply CIBIL Score logo Free CIBIL Whatsapp logo Connect on WhatsApp