The maxim of the fish

Context: The recent changes in the definition of Micro, Small and Medium Enterprises (MSMEs) in India presents us with both opportunities and challenges.

Contribution of MSMEs (before changes):

• Share in GDP: 25% 
• Export share: 45% of India’s total exports. 
• Employment: About 120 million workers 

Changed definitions:

• Conceptual level changes

• Done away with different yardsticks for service units and manufacturing units. 
• The yardstick for manufacturing and services units would now be both the turnover and the level of investment in plants and machinery.

• New composite criteria: for both manufacturing and Service units

• Micro Units: Rs 1 crore of investment and Rs 5 crore of turnover.
• Small Units: Rs 10 crore of investment and Rs 50 crore of turnover
• Medium Units: Rs 50 crore of investment and Rs 250 crore of turnover. 

• • Increased beneficiaries: Almost 99% of India’s registered companies and 70% of all listed entities in the country would be able to enjoy announced MSME benefits.
    

• Not globally competitive: India’s MSMEs would be nowhere near the ones in developed countries like Germany or South Korea (their investment limits are much higher than the revised Indian definition)
• Unrealized Cooperation: between Indian MSMEs and those from Germany or Korea due to large investment and turnover gaps.
• Quality compromised: due to the removal of provision of global tender for procurement which will deny the government benefits of global competition. 
• Matsya-Nyaya (big fxish eating up small fish): Smaller among the medium enterprises will now have to struggle harder to face tougher competition from new and larger companies.