What is MSME? MSME Meaning, Full Form, Features & Importance

09 March, 2023

The Micro, Small and Medium Enterprises (MSMEs) support industries as ancillary units, thereby contributing enormously to the overall industrial development of the country. These enterprises are engaged in the production, manufacturing and processing of goods and commodities.

According to the Micro, Small and Medium Enterprises Development Act, 2006, MSMEs are classified into three categories:

  • Micro enterprise:

    An enterprise where the investment in the plant and machinery or equipment does not exceed ₹1 crore, and turnover does not exceed ₹5 crores.


  • Small enterprise:

    An enterprise where the investment in the plant and machinery or equipment does not exceed ₹10 crores, and turnover does not exceed ₹50 crores.


  • Medium enterprise:

    An enterprise where the investment in the plant and machinery or equipment does not exceed ₹50 crores, and turnover does not exceed ₹250 crores.


The Government of India has introduced several programs for employment generation. It has implemented financing schemes to promote businesses and local manufacturing in India.

Business owners can apply for MSME business loans at attractive interest rates through HDFC Bank for easy financing options.

Difference Between SMEs and MSMEs

Small and Medium Enterprises (SMEs) are defined as per Section 7 of the MSME Development Act, 2006. SMEs form a significant component of the Indian economy and are found in both manufacturing and services sectors. These range from small grocery shops to large franchise stores.

Depending on certain factors, enterprises (urban or rural) are classified into micro, small and medium enterprises. To establish an objective system of classification and provide ease of doing business, the government had recently redefined MSMEs by raising the investment limit cap and adding a turnover criterion, as discussed in the section above.

With HDFC Bank Loan for MSME you can get speedy approvals and flexible repayment options.

Features of MSMEs

MSMEs provide several benefits to the development of the economy. They provide room for employment for millions of artisans and workers. They also promote entrepreneurship and the development of specialised skills. Additionally, they support the development of modernised technology, infrastructure and the development of the sector as a whole. They help in harnessing the growth of domestic as well as international markets.

MSMEs are playing a major role in the Government's 'Make in India' initiative to give an impetus to manufacturing in India and make India a global manufacturing hub.

Also read: How to do MSME Registration Online

Challenges Faced by MSMEs
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MSMEs have shown tremendous growth in India in the past few years but despite the growth, there are many challenges faced by this sector. Financial challenges are the foremost when it comes to the progress of the MSME sector. Most MSME proprietors are unable to secure loans from banks due to a lack of proper collateral and a steady stream of income.

MSMEs depend heavily on informal workers who lack the skills and expertise to boost productivity. Hence, India's MSMEs are far behind their counterparts in other countries. Furthermore, the absence of managerial, entrepreneurial and marketing skills remains a big challenge in the growth of the sector. Boosting sales and customer acquisition require the right mix of marketing strategies.

Additionally, due to a lack of awareness, most MSMEs miss out on having modernised technology thus hindering their growth.

Also read:The evolution of India’s MSME sector