The Indian government has adopted the Micro, Small, and Medium Enterprise Development (MSMED) Act, 2006. It describes micro, small, and medium-sized enterprises (MSMEs) as companies that manufacture, process, or preserve goods. According to the ‘aatmanirbharbharatabhiyan’ 2020s revised classifications, MSME and SME companies are categorised as:

  • Micro Enterprise: Any company having a capitalization of less than INR 1 crore is referred to as a micro-enterprise or micro-business.
  • Small Enterprise: A small business or small firm is any company with an investment of more than INR 1 crore but less than INR 10 crore.
  • Medium Enterprise: A medium-scale firm is any enterprise with an investment of more than INR 10 crore but INR 50 crore.

The government has always emphasised the expansion and improvement of this industry. This is done because it helps the country's exports grow and provides a sizable source of employment for economically depressed regions.

With such emphasis on this sector, it is quite evident that large corporations or investors are keeners on MSME and SME acquisition now.

What effects do MSMEs and SMEs have on people's lives?

  1. MSMEs and SMEs seek to improve the lives of employees. By offering them jobs, loans, and other services, they assist them.
  2. MSMEs and SMEs help push new technology, build out infrastructure, and modernise the industry as a whole, all of which improve the working circumstances for labourers.
  3. They also provide cutting-edge testing labs and top-notch certification services.
  4. In order to guarantee that customers obtain the best products, MSMEs and SMEs are now supporting product development, design innovation, intervention, and packaging in line with current trends.
  5. The Indian government's prime minister's employment generation programme (pmeg) scheme, which is administered by the Ministry of MSME, provides finance for aspiring businesspeople who want to launch a micro business. It also helps to make rural residents' lives better.

MSMEs' place and significance in India's economy

  • MSMEs are an essential component of the Indian economy and have had a big impact on the socioeconomic development of the nation. They foster job opportunities and aid with the advancement of rural and underdeveloped sections of the nation. Nearly 8% of the nation's GDP, nearly 45% of manufacturing output, and about 40% of exports are provided by MSMEs. It isn't an exaggeration to term them the "backbone of the country" given their tremendous contribution.
  • According to the national sample survey (2019), MSMEs employ approximately 46.6 million people at the moment.

Let's analyze their contribution to and significance to the Indian economy

  • Financial Security

Msme helps other industries because of its impact on exports, manufacturing, and jobs. Vehicle manufacturers typically use MNCs to buy semi-finished and supplementary products from small enterprises, such as clutches and brakes. Even after the GST is put into place, it aids in closing the gap between big and small businesses. Gst registration has been applied by 40% of the entire MSME sector, increasing government revenue by 11%.

  • Low-cost Labour

Retaining human resources through competent human resource management specialists is one of the major issues faced by large-scale businesses. However, the labour required for MSME is reduced and does not call for the usage of a highly skilled labourer. Consequently, the owner's indirect costs are similarly low.

  • Large-scale employment generation

MSMEs provide jobs, financing, and other services in an effort to better the lives of their employees. Additionally, it offers plenty of opportunities for unemployed people to seize. India yearly generates more than 1.2 million graduates, including over 0.8 million engineers. No economy has been able to provide this many freshmen in a single year before now. MSMEs boost India's young talent as they enter the workforce in a substantial way.


The growth of the nation's economy and the quality of life for average citizens both significantly depend on the MSME and SME industries. Recently, many young people have shown an interest in starting their own businesses, and some MSME industries are fully embracing this trend. As an investor, if you are looking for investment in this sector, it could prove highly beneficial for you. However, you must tread well, and consult information memorandum preparation firms so as to get everything aligned and take informed decisions.