Well, “exit SME enter MSME” might appear as some kind of technological gimmick. Not at all; SME is an acronym standing for small and medium enterprises and MSME implies micro, small and medium enterprises. SME has bowed out from economic parlance; in its place we use MSME as an all-inclusive term covering across the board types of business enterprises. Even though MSME baffles you at first sight you will develop a liking towards it if you know what it is all about and what it does for the economy.
In the Beginning
In 1970s SME as grouping of business was popularised by the World Bank and was immediately pounced upon by several countries to be used in their vocabulary. In USA, Small Business Administration (SBA) was formed to encourage and promote small businesses. A glaring lacuna was the exclusion of microenterprise, a concept originally founded by Dr. Mohammed Yunus, a Bangladesh Social Reformer in 1976. To bring in millions of such microenterprises into the economic system, policymakers in several countries brought in different threshold levels to distinguish between micro, small and medium enterprises. European Union, Africa and India went a step ahead by granting legislative teeth to micro, small and medium enterprises by introducing the concept of MSME in their statue books. Sadly, Americans continued to cling to the SME concept as a catch–all phrase to cover all type of businesses other than the larger ones. Even though SBA recognised microbusiness as a distinct type of business in 1991, threshold levels have not been clearly defined.
Threshold Levels
Let me explain how European Union and India framed threshold levels for easy identification and much needed policy intervention.
European Union
EU employs two way thresholds; one based on employees and the other on either turnover or assets of a business. See the Table below:
EU: MSME Threshold Levels
| Type of Business | Headcount (Persons up to) | Turnover (Euro Millions) | Assets (Euro Millions) |
| Micro enterprises | 10 | 2 | 2 |
| Small Enterprises | 50 | 10 | 10 |
| Medium Enterprises | 250 | 50 | 43 |
India
In India on the other hand, original cost of investments in plant and machinery excluding land and buildings is taken as the base in defining threshold levels. India tends to tweak the business into manufacturing and service sectors to bring more relevance.
Manufacturing Business
Micro enterprises Investments less than 25 Lakhs
Small Enterprises Investments over 25 Lakhs but below 5 Crores
Medium Enterprises Investments over 5 Crores but below 10 Crores
Service Business
Micro enterprises Investments less than 10 Lakhs
Small Enterprises Investments over 10 Lakhs but below 2 Crores
Medium Enterprises Investments over 2 Crores but below 5 Crores
Why MSME
Contribution of MSME to the economy is well documented. In USA 52% of the total workforce is employed in this sector. More than that, MSME created about 75% of the jobs in the last decade. In European Union, MSME covers almost 99% of the businesses registered in member countries accounting for more than 90 million jobs created. India boasts about 45% industrial output arising from MSME and about 40% exports generated from this sector. There are 26 million businesses registered under MSME in that country.
Globally, MSME is now identified as the engine of economic growth, fountain of innovation and harbinger of social equality. It brings in a great degree of competition and cheap cost alternative in manufacturing process and service sector. A feather in the cap is its ability to generate large number of jobs with much lower capital. Known as labour intensity, MSME creates more jobs by investing less money. Moreover, MSME is a sector where you can use your cosmics to your own profitable advantages. Cosmics are aspects residing within you shaping and influencing your business though these are un-seen and un-noticed by you. The first step is to identify your cosmics and then to select a sector in MSME so that you can employ your cosmics to succeed in your venture.
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