File photo of workers at a wholesale market in Delhi. (Reuters)
Experts say the move to bring retailers and wholesalers back under the MSME category will help the sector revive, survive and thrive
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- Last Update: 3 July 2021, 11:58 AM IS
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After four years of freezing, retail and wholesale businesses are back in the category of Micro, Small and Medium Enterprises (MSMEs). Scores of traders rejoiced over the years after urging the government to reverse its 2017 decision, which had rendered them unable to access credit available through special provisions for MSMEs. Here is the meaning of their reclassification.
Why were they fired in the first place?
In 2017, a gazette notification announced that small retailers and wholesalers would no longer be considered part of the MSME category. The Micro, Small and Medium Enterprises Development (MSMED) Act, which was notified in 2006, defined an ‘enterprise’ for the purposes of small businesses in terms of “manufacturing and service entities”.
While retail and wholesale businesses were included under the definition of MSMEs under the 2006 Act, the Center later removed them from the list in 2017, after concluding that they were neither involved in manufacturing nor There were service units of any kind.
As per the classification formulated, a ‘micro’ enterprise is one where the investment in infrastructure and equipment does not exceed Rs 1 crore with a turnover of less than Rs 5 crore. A ‘small’ enterprise must have an investment of less than Rs 10 crore and a turnover of less than Rs 50 crore, while a ‘medium enterprise’ can have an investment of less than Rs 50 crore, with a turnover of not more than Rs 250 crore is.
How will their inclusion under MSMEs help?
The Center has come out with several schemes from time to time to boost the MSME sector and enable easy access to formal credit for entrepreneurs in this sector. The major benefit that can now again accrue to the retail and wholesale traders is their eligibility for priority sector lending.
The Center and the Reserve Bank of India (RBI) have designated certain categories as ‘priority areas’ so that credit facilities for them can be earmarked and made easily available. The priority sector includes MSMEs along with agriculture, education, housing, renewable energy etc.
RBI has mandated that commercial banks shall ensure that 40 per cent of the adjusted net bank credit or credit equivalent amount of off-balance sheet exposure, whichever is higher, goes to the priority sector, of which 7.5 per cent should be increased to micro. to enterprises.
Also, retailers and wholesalers will now be able to register on the Centre’s Udyami portal for MSMEs, which
Introduced in 2015 as a simplified one-page registration form. Benefits of obtaining enterprise registration include getting cheaper bank credit, tax exemption and preference for government tenders.
How many retailers, wholesalers will benefit from this move?
Announcing the decision to bring retailers and wholesalers back under the MSME umbrella, Union Minister Nitin Gadkari tweeted that the move would help 2.5 crore entities. Earlier, however, industry body Confederation of All India Traders (CAIT) had said that the removal of MSME classification has adversely affected. 8 crore retailers and wholesalers affected, which were said to be part of the service industry.
What is the total number of MSMEs in India?
The annual report of the Ministry of MSME for 2017-18 states that the country 6.34 crore “Unincorporated Non-Agriculture MSMEs”. As per the 2015-16 data, the sector contributed 28.7 per cent to the national GDP, while the 73rd round of the National Sample Survey (NSS) conducted during 2015-16 stated that MSMEs provide employment to 11.10 crore people. We do.
With around 90 lakh units, Uttar Pradesh leads the list of states with the largest number of MSMEs, followed by West Bengal (88.7 lakh) and Tamil Nadu (49.5 lakh).
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