What is the difference between micro, small, medium enterprises

Last Updated: 14 Oct 2024

The term MSME denotes to micro, small and medium enterprises. The MSME Act, 2006 has been amended to provide new definitions for MSME enterprises. These definitions became effective on 1st July 2020.

As per the new definitions, a micro enterprise is now one that has an investment of not more than Rs 1 crore and annual turnover or sales of not more than Rs 5 crore. A small enterprise is one that has investment in plant, machinery etc. of not more than Rs 10 crore and annual turnover of not more than Rs 50 crore. A medium enterprise is one that has investment in plant and machinery of not more than Rs 50 crore and annual turnover of not more than Rs 250 crore. The amended act also does not make any distinction between a manufacturing business and services business. The ceilings and thresholds of MSME classification for both manufacturing and services businesses are now same.

A number of countries classify MSME enterprises on the basis of number of people employed in the business. But in India, this classification is on the basis of the investment in the business, and its annual turnover.

Using this classification, you can check whether your business falls in the MSME category. This understanding is important. A number of incentives, such as low interest loans, are available for businesses that fall in the MSME category. You can avail of these benefits if your business is an MSME enterprise. Lenders such as IIFL Finance also offer business loans for MSME businesses. You can avail of these loans for meeting the financial needs of your business or for expanding it.

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