Revising the Definition of MSMEs: Who is Likely to Benefit From it?
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Revising the Definition of MSMEs: Who is Likely to Benefit From it? R. Nagaraj1 · Vikash Vaibhav1 Published online: 11 October 2020 © Indian Society of Labour Economics 2020
1 Introduction Until recently, Micro, Small and Medium Enterprises (MSMEs), registered with the concerned government agencies, have been defined in terms of investment in plant and machinery, as mentioned in panel A of Table 1. The registration is the eligibility for availing government promotional assistance, as listed in Table 2. On March 25, economic lockdown was imposed to tackle COVID-19. Expectedly, the decision has severely hurt jobs and livelihoods, especially in the informal sector. To mitigate the hardships, the Prime Minister proposed Rs. 20 lakh crore Atma Nirbhar Bharat stimuli and relief package. On May 13, the Finance Minister (FM) announced the measures for the MSME sector. A prominent item in it was the much awaited revision of the criteria for registration as an MSME, which is as follows: 1. Abolition of the distinction between manufacturing and services enterprise. 2. Raising the upper limits for investment in plant and machinery to qualify as an MSME. 3. Introducing “turnover” as an additional criterion. Panel B of Table 1 has the revised definitions. The most significant revision is the increase in the investment limit for medium-sized enterprises, from Rs. 10 crores to Rs.50 crore. The following are other incentives included in the FM’s economic package:1 1. Rs. 3 lakh crore emergency working capital facility for businesses, including MSMEs, 2. Rs. 20,000 crore subordinate debt for stressed MSMEs, 1
https://pib.gov.in/PressReleseDetailm.aspx?PRID=1623601 (Accessed on 15 June 2020)
* R. Nagaraj [email protected] 1
IGIDR, Mumbai, India
13
Vol.:(0123456789) ISLE
S120
The Indian Journal of Labour Economics (2020) 63 (Suppl 1):S119–S126
Table 1 MSME definitions
Panel A
Panel B
Old definition (Inv.)
New definition (mfg & ser.)
Mfg.
Services
Investment
Turnover
Micro
25 L
10 L
1 cr.
5 cr.
Small
5 cr.
2 cr.
10 cr.
50 cr.
Medium
10 cr.
5 cr.
50 cr.
250 cr.
As per the new definition, an enterprise qualifies as MSME only if it satisfies both the criteria
Table 2 Benefits of MSME registration. Source: Ministry of MSME, RBI (2019) Collateral free loans from banks
Ease of getting licenses, approvals and registrations
Reservation policies to manufacturing 1 production Special consideration on international trade fairs sector Octroi benefits
Waiver of stamp duty and registration fees
Exemption under Direct Tax Laws
Bar code registration subsidy
Subsidy on NSIC Performance and Credit ratings
Eligibility for IPS subsidy
Counter Guarantee from Government of India through CGSTI
Protection against delay in payment
Reduction in rate of interest from banks
15% CLCSS subsidy to purchase fully
Waiver in security deposit in government
Concession in electricity bills
Reimbursement of ISO Certification
Excise Exemption Scheme
Preference in procuring from government
P15% weightage in price p
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