In a notification issued last week, the Micro, Small and Medium Enterprises (MSMEs) ministry revealed that the new definition of MSMEs will come into effect from July 1, 2020. So, the long wait is over now. After 14 years since enactment of the MSME Development Act, a revision in MSME definition was announced last month. While this announcement is remarkable in itself, several other add-ons have also been offered, which should immensely benefit the sector.

First, it was a long-standing demand that we should move away from the previous investment-based definition to a more realistic turnover-based definition. The government last month took into account both the investment and turnover aspects, and increased the previous investment limits for all three segments: micro (Rs. 1 crore), small (Rs. 10 crore) and medium enterprises (Rs. 100 crore). On the other hand, the turnover limits were set at Rs. 5 crore, Rs. 10 crore and Rs. 20 crore, respectively.

No doubt it was a welcome decision, but criticism followed, particularly as far as limits set for the medium enterprises were concerned. Industry observers viewed that the Rs. 20 crore/100 crore limits were not enough, considering the current market and price conditions, and in a pleasant surprise the Centre further increased these limits (to Rs. 50 crore/250 crore) in a prompt decision on June 1. Again, this is a progressive measure, and now more businesses will be able to remain in the priority sector lending list of banks.

In another major decision, the Centre accepted the demand of the export sector for excluding revenue collected through exports from the turnover limits fixed for MSME. With this new norm, a large number of exporters can now be classified as MSMEs and avail the benefits offered exclusively to MSMEs. In addition, the move will help in internationalisation of MSMEs, which can now jump into the export bandwagon without worrying about losing the benefits given to MSMEs.

I invite your opinions.