Micro, small, and medium enterprises across India accounted for nearly 27 percent of India's gross domestic product (GDP) in the financial year 2021. This was a decrease in contribution to the country's GDP in recent years. Additionally, they account for significant part of exports from the country.
Classification of MSMEs in India
As per the upward revision announced in 2020, the definition of micromanufacturing and services units was increased to 10 million Indian rupees of investment and 50 million rupees of turnover; the small unit was increased to 100 million investment and 500 million of turnover. The limit of the medium unit was increased to 500 million of investment and 2.5 billion of turnover. The objective of this change was to ensure that MSMEs can exhaust the state benefits without the fear of outgrowing themselves. However, critics argue that the gap defining medium enterprises is too wide and may create unfair competition.
Informal micro enterprises
Microenterprises account for the majority share of the MSME sector in India and a significant number of these enterprises are informal. Cost of compliance, complex labor laws, and lack of awareness about the benefits of formalization could be some of the reasons for keeping the micro-enterprises unregistered. Since businesses in the informal economy do not contribute to the tax base and tend to remain small with limited access to formal finance, it impairs a country’s ability to truly gauge the socio-economic metrics.
Micro, small and medium enterprises as a share of GDP across India from financial year 2012 to 2021
Characteristic
MSME as a share of GDP
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Ministry of Micro, Small and Medium Enterprises (India), & The Financial Express (India). (July 28, 2022). Micro, small and medium enterprises as a share of GDP across India from financial year 2012 to 2021 [Graph]. In Statista. Retrieved July 22, 2024, from https://www.statista.com/statistics/912576/india-msmes-contribution-share-to-gdp/
Ministry of Micro, Small and Medium Enterprises (India), und The Financial Express (India). "Micro, small and medium enterprises as a share of GDP across India from financial year 2012 to 2021." Chart. July 28, 2022. Statista. Accessed July 22, 2024. https://www.statista.com/statistics/912576/india-msmes-contribution-share-to-gdp/
Ministry of Micro, Small and Medium Enterprises (India), The Financial Express (India). (2022). Micro, small and medium enterprises as a share of GDP across India from financial year 2012 to 2021. Statista. Statista Inc.. Accessed: July 22, 2024. https://www.statista.com/statistics/912576/india-msmes-contribution-share-to-gdp/
Ministry of Micro, Small and Medium Enterprises (India), and The Financial Express (India). "Micro, Small and Medium Enterprises as a Share of Gdp across India from Financial Year 2012 to 2021." Statista, Statista Inc., 28 Jul 2022, https://www.statista.com/statistics/912576/india-msmes-contribution-share-to-gdp/
Ministry of Micro, Small and Medium Enterprises (India) & The Financial Express (India), Micro, small and medium enterprises as a share of GDP across India from financial year 2012 to 2021 Statista, https://www.statista.com/statistics/912576/india-msmes-contribution-share-to-gdp/ (last visited July 22, 2024)
Micro, small and medium enterprises as a share of GDP across India from financial year 2012 to 2021 [Graph], Ministry of Micro, Small and Medium Enterprises (India), & The Financial Express (India), July 28, 2022. [Online]. Available: https://www.statista.com/statistics/912576/india-msmes-contribution-share-to-gdp/