Union Cabinet approves change of definition of MSMEs

On June 1, 2020, the Union Cabinet approved the changes made to the definition of MSMEs. The Finance Minister Nirmala Sitaraman had announced about the changes being made to MSMEs while she announced the economic package allocated to Atma Nirbhar Bharat Abhiyan.


According to the new definition, MSMEs with investment till Rs 1 crore and turn over of Rs 5 crores have been classified as Micro units. The MSMEs with investment of Rs 10 crore and turn over of Rs 50 crores are classified as small units. The MSMEs with investment Rs 50 crore and turn over upto Rs 250 crores have been classified as medium units


The change in definition will help attract investment, improve ease of doing business, create jobs. There are more than 60 million MSMEs in the country. They contribute to 29% of India’s GDP and are offering 110 million jobs. The MSMEs also contribute 48% of total exports of India. Therefore, it is highly important to keep the MSME sector alive. The COVID-19 and the lock down imposed have affected the MSME badly. Thus, the change in definition will help boost the MSME sector in a big way.

Other Measures

The Cabinet has also approved provision of loans up to Rs 10,000 to the street vendors. Also, cabinet approved the decision of increasing MSPs of 14 Kharif crops.

The GoI is to infuse Rs 50,000 crores into the MSMEs that are involved in exports. The GoI also allocated Rs 4,000 crores towards distressed asset funds. These funds are to be used to provide loans up to Rs 75 lakhs to the MSMEs.




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