Finance Minister's Revised Definition Of MSMEs Explained

Union Finance Minister Nirmala Sitharaman on Wednesday announced the revision of the definition of micro, small and medium enterprises (MSMEs), as decided by the Centre. She said that this revision would mark a decisive change in favour of MSMEs.

The underlying reason according to the Finance Minister is that the low threshold limit in the existing MSME definition created a sort of fear among them that if they were to expand further, they could lose the benefits that MSMEs enjoy.

Nirmala Sitharaman said that the Centre decided to remove the distinction in the definition between manufacturing-based MSME and service-based MSMEs. The other significant change introduced by the Centre is to add turnover as another yardstick to define an MSME, while up until now they were defined on the scale of their investments. This image helps us understand the revised definition better: