Meaning and Definition of Micro, Small and Medium Enterprises

Meaning and Definition of Micro, Small and Medium Enterprises

MSME: micro, small and medium enterprises play a pivotal role in the economic and social development of the country, often acting as a nursery of entrepreneurship they also play a key role in the development of the economy with their effective efficient flexible and innovative entrepreneurial spirit. The MSME sector contributes significantly to the country’s manufacturing output employment and exports and is credited with generating the higher employment growth as well as accounting for a major share of individual production and exports.

In India the term medium establishment has for the first time been defined in terms of a separate act, governing the promotion and development of micro small and medium enterprises this came into from 2nd October 2006.

Characteristics of MSME

The characteristics of MSMEs sector are as follows:

  • Born out of individual initiatives and skills: MSME tend to evolve along a single entrepreneur or a small group of entrepreneurs in many cases leveraging on a skill set. There are other MSME s being set-up purely as a means of earning livelihood. These includes many trading and retail establishment while most countries continue SMEs to manufacturing services others adopt a broader definition and include retailing as well.
  • Greater operational flexibility: The direct involvcement of owner coupled with flat hierarchical structures and less number of people ensure that there is greater operational flexibility.
  • Low cost of production: SMEs have lower overheads. This translates to lower cost of production, least upto limited volumes.
  • High Propensity to adopt Technology: Traditionally SMEs have shown a propensity of being able to adopt and internalize the technology being used by them.

Objectives of MSME

  1. To create immediate employment opportunities with relatively low investment.
  2. To make small industries export-oriented and help quality graduation.
  3. To remove regional disparities through a deliberate policy.
  4. To encourage growth in villages and in small towns.
  5. To reduce disparities in income, wealth and consumption.
  6. To mobilize resources of capital and skills and their optimum utilization.
  7. To eliminate economic bach awareness of rural and underdeveloped regions in the country.
  8. To provide a steady source of income to the low –income groups living in rural and urban areas of the country.
  9. To provide substitutes for various industrial products now being imported into the country.
  10. To effect an integration of the activities of small business with the rural economy on the one hand and with the large-scale business on the other.
  11. To improve the quality of industrial products manufactured in the cottage industry sector and to enhance both production and exports.
  12. To remove the problems created by urbanization and consequent growth of big towns and cities and to attain self-reliance.

The scope of MSME

1. Manufacturing Industries: This type of small enterprise is involved in producing complete articles used for direct consumption and also for processing industries these are;

  1. Village and cottage industries: These are industries which are carried on in homes of workers which we have designated as cottage industries.
  2. Hand-looms and Handicrafts: These industries cover attains skilled craftsmen and technicians who can work in their own houses if their work requires  less than 300 square feet space, less than 2 kw power less than 5 workers and no pollution is caused handicrafts, toys, dolls, small plastic and paper products, electronic and electrical gadgets are some examples of these industries.
  3. Modern small industries:  These industries are:
  1. Small enterprises: According to the government of India 2000, the small-scale industry is an undertaking having an investment in plant and machinery of not more than 1 crore.
  2. Ancillary industries: These are industrial undertakings having fixed investment in plant and machinery not exceeding 75 lac engaged in the manufacturing of parts components, sub-assemblies, tooling or intermediaries, or the rendering of services supplying 30% of their products or services, as the case may be, to other units for production of other articles.
  3. Tiny units:  The refers to undertakings having fixed investment in plant and machinery not exceeding 5lac. This also include undertakings providing services such as laundry, zeroing, repairs and maintenance of customer equipment and machinery, hatching and poultry, etc

2. Trending industries: these types of small entrepreneurs are engaged in sale and purchase or exchange of goods and services. These industries act as middlemen between producers and consumers. This type of units includes wholesaler, retailer and commission agents.

3. Service industries: These small entrepreneurs’ are engaged in personal or household services in rural areas and towns with a population not exceeding 5 lac and having fixed investment in plant and machinery not exceeding 2 lac.