THE MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT ACT, 2006

The Micro, Small and Medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development in all over the world. Let there be any category of country (Developed, Developing and Under Developed), the existence of MSMEs is inevitable. The major advantage of the sector is its pivotal role through its contribution in Industrial output, Exports, and majorly in Employment generation at low capital cost.

The labor intensity of the MSME sector is much higher than that of the large enterprises. The MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports.

The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2018 was introduced in Lok Sabha by the Minister of State for Micro, Small and Medium Enterprises, Mr. Giriraj Singh on July 23, 2018. The Bill amends the Micro, Small and Medium Enterprises Development Act, 2006.  The Act classifies and regulates enterprises as micro, small and medium enterprises.

The Act classifies micro, small and medium enterprises (MSMEs) on the basis of investment in: 

  • MANUFACTURING ENTERPRISES: 
    The enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation) Act, 1951 are defined in terms of investment in Plant & Machinery.
  •  SERVICE ENTERPRISES: 
    The enterprises engaged in providing or rendering of services and defined in terms of investment in equipment
Type of Enterprise2006 Act2018 Bill
ManufacturingServicesAll enterprises
Investment in Plant and MachineryInvestment in EquipmentAnnual Turnover
Micro25 lakh10 lakh5 crore
Small25 lakh to5 crore10 lakh to2 crore5 to75 crore
Medium5 to 10 crore2 to 5 crore75 to250 crore

MAIN FEATURES OF THE MSMED ACT

Constitution of a National Board for Micro, Small and Medium Enterprises to:

  • Examine the factors affecting the promotion and development of micro, small and medium enterprises and review the policies and programmes of the Central Government in this direction;
  • Make recommendations for facilitating promotion and development of and enhancing the competitiveness of the micro, small and medium enterprises.
  • Advice the Central Government on use of the Fund or Funds constituted under Section 12 of the Act.
  • Provide for statutory definitions of “small enterprise” and “medium enterprise”.

BENEFITS OF REGISTRATION OF MSME ENTERPRSES: 


If a micro or small enterprise files a memorandum with District Industries Centre (DIC) of its area, then it stands to gain many benefits like:

  • Easy finance availability from Banks, without collateral requirement;
  • Protection against delay in payment from Buyers and right of interest on delayed payment;
  • Preference in procuring Government tenders;
  • Stamp Duty and Octroi benefits; and concession in electricity bills;
  • Reservation policies for manufacturing/production through conciliation and arbitration;
  • Reimbursement of ISO Certification Expenses;

Similarly, Medium enterprises enjoys the below mentioned benefits:

  • Easy finance availability from Banks, without collateral requirement
  • Preference in procuring Government tenders
  • Reservation policies for manufacturing / production sector enterprises
  • Time-bound resolution of disputes with Buyers through conciliation and arbitration

IMPORTANCE OF MSME FOR INDIAN ECONOMY

  • Employment: It is the second largest employment-generating sector after agriculture. It provides employment to around 120 million persons in India.
  • Contribution to GDP: With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.
    • MSME ministry has set a target to up its contribution to GDP to 50% by 2025 as India becomes a $5 trillion economy.
  • Exports: It contributes around 45% of the overall exports from India.
  • Inclusive growth: MSMEs promote inclusive growth by providing employment opportunities in rural areas especially to people belonging to weaker sections of the society. 
    • For example: Khadi and Village industries require low per capita investment and employs a large number of women in rural areas.
  • Financial inclusion: Small industries and retail businesses in tier-II and tier-III cities create opportunities for people to use banking services and products.
  • Promote innovation: It provides opportunity for budding entrepreneurs to build creative products boosting business competition and fuels growth.
  • Campaigns like Skill India, Startup India, Digital India and Make in India aim to provide MSME players with a level playing field and a definitive push towards enhanced productivity.
  • Digitization: Increasing Internet penetration, customer’s familiarization with digital payments fuelled by B2C ecommerce players facilitates MSME sector growth.
  • Tie-ups with new-age Non-Banking Finance (FinTech) Companies allowed access to timely collateral free finance to MSMEs.

Thus, Indian MSME sector is the backbone of the national economic structure and acts as a bulwark for Indian economy, providing resilience to ward off global economic shocks and adversities.

CONSTITUTION OF ADVISORY COMMITTEE AT NATIONAL LEVEL TO MAKE RECOMMENDATIONS:

  • Level of employment in a class/classes of enterprises;
  • Level of investment in plant and machinery or equipment;
  • Discretionary for a micro or small enterprise and also for a medium enterprises engaged in providing or rendering of services,
  • For medium enterprises, the Central Government shall specify by notification the authority with whom they would file memorandum,
  • In respect of micro & small enterprises the State Govt. shall by notification, specify such Authority.

MEASURES FOR PROMOTION, DEVELOPMENT AND ENHANCEMENT OF COMPETITIVENESS OF MICRO, SMALL AND MEDIUM ENTERPRISES:

  • Extension of credit facility for micro, small and medium enterprises,
  • Preference policies in procurement of goods and services for micro and small enterprises,
  • Provision for Central funds.

DELAYED PAYMENTS TO MICRO AND SMALL ENTERPRISES:

The Act stipulates that the payments for supplies or services have to be cleared in favor of micro and small enterprises within 45 days of acceptances. The State Government shall, by notification, constitute one or more Micro and Small Enterprises Facilitation Council to monitor the matter of delayed payments

POWER TO MAKE RULES:

  • The Central Government may, by notification, make rules to carry out the provisions of the Act.
  • The State Government may also, by notification, make rules to carry out the provisions of the Act.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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