Background: In January 2019, The Reserve Bank of India (RBI) set up an 8 member expert committee under the Chairmanship of Shri U K Sinha, former Chairman of SEBI to review the framework for the Micro, Small and Medium Enterprises (MSME), and suggest long-term solutions for the economic and financial sustainability for the sector and also to study the impact of the recent economic reforms on the sector and identify the structural problems impacting its growth. The Expert Committee submitted its Report to Governor, RBI on Jun 18, 2019.

This article will highlight excerpts from the report, MSME definition and benefits of MSME registration.

As per the Report,

• India’s 63.38 million MSMEs contribute significantly to the country’s economic growth. The sector accounts for about 45% of manufacturing output, more than 40% of exports, over 28% of gross domestic product and employs about 111 million people
• MSMEs continue to face challenges of formalisation, access to knowledge services, access to timely and adequate finance, improving competitiveness, availability of skilled manpower, access to latest technology and marketing.
• MSME sector is yet to benefit from the advances in digitisation, which can substantially reduce the cost and time for this sector.
• Self Help Groups (SHGs) and rural entrepreneurship have made very good progress in the last few years, but creating the environment for the next stage of their growth is a task yet to be accomplished.
• The sector was also affected in the recent past due to structural changes in the economy.

Also read: The big business potential

The Committee has made over 100 recommendations to ease the problems of SME sector. It made recommendations on credit and equity funding to the small and medium companies, the issue of delayed payments, need for legislative changes, rural enterprises, SHGs, and creation of a specific fund by the Government.

India’s 63.38 million MSMEs contribute significantly to the country’s economic growth. The sector accounts for about 45% of manufacturing output, more than 40% of exports, over 28% of gross domestic product and employs about 111 million people

In a series of articles, we will state the recommendations of this committee and how you can leverage these for your business growth.

MSME Definition and Registration

MSMEs, across the world, are defined in different ways based on various criteria - turnover, investments in asset and number of employees etc.

In India, MSMEs are defined based on investment in Plant and Machinery/equipment. In terms of Chapter III – 7 (1) of MSMED Act, 2006, MSMEs are classified into Manufacturing and Service Enterprises and are defined as follows:

Some of the benefits of having MSME registration are:

Also read: How SMEs can succeed in a digital world

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