According to two sources familiar with the proposal, the government aims to adjust the capital investment standards to qualify as micro, small, and medium companies (MSMEs) on a regular basis to make them more realistic and linked with shifting inflation levels.
The change might happen every three or five years, depending on the results of stakeholder talks on the draught MSME policy, according to officials who spoke on the condition of anonymity.
The suggestion will be included in the next MSME policy by the Union MSME ministry, which will then bring it to the cabinet for approval once the policy is finalised. The Micro Small and Medium Enterprises Development Act of 2006 currently contains no mechanism for amending the investment-based definition of MSMEs at regular periods.
After the MSMED Act is changed, the Centre will be able to adjust certification standards at regular intervals by issuing notifications. This would be a positive development, as the MSME segment’s size and scope are expanding in tandem with the expansion of business and prospects,” said an expert from a consulting firm who did not want to be identified. “Regular revisions to the investment-based definition would aid MSMEs in their growth.”
After a 14-year delay since the passage of the MSMED Act in 2006, the government changed the criteria in the pandemic year 2020. This was a long time between actions. Regular adjustments that take current inflation into account will make the process more realistic,” he said. MSMEs employ about 110 million people across industries, making them the second-largest employer.
They were negatively impacted by the pandemic outbreak in 2020, and their rehabilitation is critical to the Indian economy’s early recovery.The government increased the definition of micro-manufacturing and services units to 1 crore of investment and 5 crore of income in the Atmanirbhar Bharat package announced in June 2020. Small units now have a ceiling of 10 crore in investment and 50 crore in revenue, while medium units now have a limit of 50 crore in investment and 250 crore in revenue.
The government referred to it as “another step” in improving the ease of doing business, attracting investments, and creating more jobs in the MSME sector at the time.The Union government is also considering crafting a model MSME law for distribution across states in an effort to provide uniformity to the sector’s laws, as states have varied laws and ordinances to manage small enterprises.
According to the sources cited above, in addition to institutionalising regular revisions of capital investment norms for the MSME sector, the government is considering forming a separate group of officials to examine the structures of various industries and recommend appropriate investment bands for each sub-sector. The Prabhat Kumar group, which made recommendations to the Centre in 2017, also proposed this.
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