Finance Minister Nirmala Sitharaman announced the much-awaited economic package that may bring relief to the MSME’s that are worst –hit due to COVID-19 pandemic. The centre has changed the definition of MSMEs (micro, small and medium enterprises) along with announcing an increase in the investment limits to benefit many businesses in the country.

The criterion of turnover has been introduced for MSME’s recognition. The government also puts an end to the distinction between manufacturing and services MSME. 

As per the existing definition, companies with less than Rs. 25 lakh (US$ 33 thousand)investment in manufacturing and less than Rs. 10 lakh (US$ 13 thousand) in the service sector are classified as the micro-enterprises. 

As per the new definition, the businesses with investments of less than 1 crore (~US$133 thousand) and with turnover of Rs. 5 crore (~US$ 667 thousand) are classified as the micro-enterprises. 

The small enterprise’s investment limit has also been raised to Rs. 10 crore (US$ 1.3 Mn) and the turnover of the company has to be less than Rs. 50 crore. (US$ 6.6 Mn)

The medium enterprise’s investment limit has been raised to Rs. 20 crore (US$ 2.7 Mn) and with a turnover limit of Rs. 100 crore (US$13.3Mn)

Amendments in the laws will also be made to bring the above changes into effect.

A collateral-free automatic loan up to Rs. 3 lakh crore (US$ 40 Bn) has been announced by the centre for businesses including MSMEs.

Borrowers with an outstanding of up to Rs. 25 crore (US$ 18.8 Mn) and a turnover of Rs. 100crore (US$ 13.3 Mn) will be eligible for the special collateral-free loan. 

MSME’s make a massive contribution to the government tax pool. Well-deserved government support is a fair chance for these businesses to remain viable. 

(conversion followed Rs. 75 = US$ 1)

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