A Beginner’s Guide to MSME

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 INR 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 INR 15,700 Crore in 2022.

As MSMEs are emerging as a crucial aspect of the Indian economy, let's understand MSMEs in detail. Keep reading!

What is MSME?

MSME stands for Micro, Small, and Medium Enterprises. To be considered as an MSME, a business should have an annual turnover of up to INR 5 Crore. The objective of MSMEs in India is primarily to focus on 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 table below.

Size of the Enterprise	Investment	Annual Turnover
Micro	Up to INR 1 Crore	Up to INR 5 Crore
Small	Up to INR 10 Crore	Up to INR 50 Crore
Medium	Up to INR 50 Crore	Up to INR 250 Crore

 

Importance of MSMEs

The MSME sector is contributing substantially to the development of the nation. As per data from the Ministry of Micro, Small & Medium Enterprises, as of December 14, 2023, the Udyam Registration portal registered 21,516,394 MSMEs, replacing the former process of filing for a Udyog Aadhaar Memorandum (UAM). Registered micro-enterprises stood at 20,812,759 (96.74%), followed by small enterprises at 586,643 (2.69%) and midsized enterprises at 54,352 (0.25%).

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.

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Features of MSMEs

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

Why Avail of an MSME Loan?

Even though MSMEs are thriving in India, some business owners still struggle to find adequate finances for their businesses. To support small business owners, the Government of India has launched various schemes and benefits for MSMEs. Besides this, many financial institutions also offer 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. By availing of an MSME loan, business owners can have complete control over their finances and can meet long-term and short-term expenses. With Poonawalla Fincorp, the loan amount can be used for various financial needs such as managing operational cost, improvement of business structure, hiring trained and skilled staff, upgrading to new technology or machinery, etc.

To Conclude

MSMEs play a crucial role in the economic development of any country. They are essential for job creation, innovation, and GDP growth, and they contribute significantly to the local community. Supporting MSMEs through initiatives such as MSME loans is critical to ensuring their success and promoting entrepreneurship. With continued support, MSMEs can continue to thrive and drive economic growth, which will benefit both the local community and the country as a whole.

Disclaimer

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.
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