The Union Cabinet, headed by Prime Minister Narendra Modi, on Monday approved recent changes in the definition of micro, small and medium enterprises (MSMEs), and brought an even larger number of businesses in the medium enterprises category. The decisions were part of the government's "Atma Nirbhar Bharat" economic package detailed by Finance Minister Nirmala Sitharaman last month, in a bid to support the economy against the coronavirus pandemic. "There are six crore registered MSMEs in the country which provide jobs to over 11 crore people and contribute 29 per cent to the GDP," said Union Minister Nitin Gadkari, after the Cabinet meeting.
The government changed the definition for classification of MSMEs. As per the new definition, if a company has invested Rs 1 crore and earns turnover of Rs 5 crore, it will be classified as a micro company. Likewise, a company has invested Rs 10 crore and has a turnover of Rs 50 crore will be classified as a small enterprise.
For a medium enterprise, the investment limit has been increased to Rs 50 crore and that of turnover hiked to Rs 250 crore.
The earlier distinction between a manufacturing enterprise and a service company has also been removed, Mr Gadkari added. Export revenue for micro, small or a medium enterprises will not be included while classifying the company as one of them, the minister said.
The government also approved the creation of a Rs 50,000-crore Fund of Funds to help select high-growth MSMEs with a good track record, and help them list their shares on stock exchanges.
The fund will have an initial corpus of Rs 10,000 crore, whcih will eventually go up to Rs 50,000 crore, Mr Gadkari said.