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India revises definition of MSME, includes firm turnover

Published: June 2, 2020

India today revised further the definition of micro, small and medium enterprises (MSME). A business is now ‘micro’ if it has investments up to ₹1 crore and a turnover of less than ₹5 crore, and is ‘small’ if its investment limit is ₹10 crore with a turnover of less than ₹50 crore. Those with investments up to ₹20 crore with a turnover of less than ₹250 crore are ‘medium’.

A special meeting of the Cabinet Committee on Economic Affairs (CCEA) convened today under the chairmanship of Prime Minister Narendra Modi took the decision, according to an official release.

The earlier definition of MSMEs was done on the basis of investments put in, while the revised definition includes turnover of the company as well.

Announced by finance minister Nirmala Sitharaman on May 13 as a part of the economic stimulus package, the new definition for medium enterprises was earlier kept at a turnover of ₹100 crore. This had attracted criticism regarding the low threshold of definition.

All differences between manufacturing and services in terms of definition have been eliminated.

The cabinet also approved the provision that was made of ₹20,000 crore subordinate debt for 2 lakh MSMEs, which are either non-performing assets (NPAs) or are stressed.

The government will support MSMEs with ₹4,000 crore to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of MSMEs equal to 15 per cent of their existing stake in the unit subject to a maximum of ₹75 lakhs.

The government also announced it will set up a Fund of Funds (FoF) with a corpus of ₹10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a mother and a few daughter funds. It is expected to benefit over 25 lakh MSMEs under stress.

Welcoming the decision, the Tiruppur Exporters’ Association (TEA) said in a statement that the revised definition will be highly beneficial for the Tiruppur knitwear garment exporting units, attract more investment and create more jobs.

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