Government notifies the new definition of the MSME sector

The central government has notified the revised classification criteria for the micro medium and small enterprises(MSME). The revised classification was announced by Union Finance Minister Mrs Nirmala Sitharaman in her 2025-26 Budget speech.

The revised classification norms will be applicable from the start of the new financial year starting on 1st April 2025. The last time the classification was revised was in July 2020. 

New Classification of the MSME 

The Micro Small and Medium Enterprises Development (MSMED) Act 2006, which came into effect on 2 October 2006, defines the MSME sector in India.  

Initially, the MSME enterprises were divided into manufacturing and service sectors. However, the MSMED Act 2006 was amended in 2020 by the Parliament and abolished the distinction between manufacturing and service sector enterprises. 

At present, MSMEs are defined on the twin criteria of- investment in plant and machinery and on the basis of their annual turnover.

Classification with effect from 1 April  2025.

Micro Enterprise 

• The maximum investment limit in plant and machinery is up to Rs 2.5 crores (earlier it was Rs 1 crore).
• Turnover Limit - Not more than Rs 10 crore in a financial year (earlier it was Rs 5 crore).

Small  Enterprises 

• The maximum investment limit in plant and machinery is more than 2.5 crores and up to Rs 25 crore (earlier it was more than Rs 1 crore up to Rs 10 crore ).
• Turnover Limit - more than Rs 10 crore up to Rs 100 crore in a financial year (earlier it was more than Rs 5 crore to up to Rs 50 crore).

Medium Enterprises

• The maximum investment limit in plant and machinery is more than 25 crores and up to Rs 125 crore (earlier it was more than Rs 25 crore up to Rs 50 crore ).
• Turnover Limit - more than Rs 100 crore up to Rs 500 crore in a financial year (earlier it was more than Rs 50 crore to up to Rs 250 crore).

2025-26 Budget Announcement for the MSME Sector 

The Finance Minister identified the MSME sector as one of the 6 engines of the Indian economy during her 2025-26 budget speech.

She announced several initiatives for the MSEM sectors. 

Some of the important announcements regarding the MSME sectors are as follows:

Contribution of the MSME in India's economy

• One crore registered MSMEs(Micro, Small, and Medium Enterprises) in the country.
• It employs 7.5 crore people, 
• MSME contribution in the manufacturing sector is 36 % and 45 % in the county’s exports.

Other Initiatives 

• credit cards for micro-enterprises registered on the Udhyam Portal to be introduced
• 10 lakh cards to be issued in the first fiscal year.
• The credit guarantee cover increased from Rs 5 crore to Rs 10 crore. 
• For start-ups, the guarantee cover doubled from Rs 10 crore to Rs 20 crore.

Scheme for First-time Entrepreneurs

• Government to launch a new start-up scheme for first-time women, Scheduled Castes and Scheduled Tribes entrepreneurs scheme.

• 5 lakh entrepreneurs to be covered
• Term loans up to Rs 2 crore in the next 5 years for the MSME entrepreneurs.

National Manufacturing Mission 

• Will be launched focused on small, medium and large industries for furthering “Make in India’ initiative of the government.
• The mission will support Clean Tech manufacturing so as to improve domestic value addition and build an ecosystem for solar PV cells, EV batteries, motors and controllers, electrolyzers, wind turbines etc.