The Indian MSME sector contributes almost 30% to the country’s GDP, 45% of the manufacturing output, and around 48% of the country’s exports. It is indeed the backbone of the Indian economy and is a major employment generator with more than 11 crore people employed in the MSME sector. The list of businesses that come under MSMEs have crossed 65 million, with a new classification of MSMEs that’s based on annual turnover and investment in plant and machinery.
As per the Micro, Small and Medium Enterprises Development (MSMED) Act of 2006 definition, all enterprises in the manufacturing and service categories were considered as MSMEs. The aim of this classification was to help businesses avail various government benefits and get access to multiple government schemes and promotions.
On 2 July 2021, Union Minister, Nitin Gadkari, through an amendment announcement, revised the definition for Micro, Small and Medium Enterprises. Under the new definition, both wholesalers and retailers are brought in under the classification of MSMEs. Therefore, all the benefits that were earlier open to MSMEs are now open to wholesalers and retailers as well. There are about 2.5 crore wholesale and retail traders who are expected to benefit from this amendment since the government decided to reinstate them as MSMEs.
|New definition of MSME based on investment amount and turnover of the enterprise
|Investment limit (in ₹)
|Turnover limit (in ₹)
While there are multiple businesses including service businesses, manufacturing, and trading business in India, the government has a specific list of businesses that are considered as MSME. This article will talk about the businesses that comes under MSME, types of MSMEs in India and the complete list of industries under MSME.
Which are the sectors that come under MSME?
As per the government circular, ‘all business activities – services and manufacturing are covered in MSME sector’ as long as they meet the investment and turnover criteria mentioned above. However, there could be certain exceptions to this. Broadly speaking, MSME businesses fall under two categories:
- Manufacturing business activities: MSME businesses that are in the manufacturing space – that is, they produce finished goods from raw materials, contribute to 45% of the total manufacturing output and 40% of total exports. With the popularity of the ‘Made in India’ campaign the numbers are already growing.
- Service sector business activities: According to data in the Udyam portal, MSMEs in the service sector comprise a larger proportion as compared to those MSMEs in the manufacturing sector. Though the benefits of Udyam MSME registration are applicable to both, Indian entrepreneurs have registered 8.65 lakh enterprises under the service sector as compared to over 5.37 lakh enterprises under the manufacturing category.
What are the businesses that come under MSME?
Here is a list of industries that come under MSMEs. The list contains examples of businesses that come under the definition of MSMEs.
List of businesses that comes under MSME include the following:
- Leather products
- Moulding of products like combs, umbrella frames, plastic toys, etc.
- Natural fragrance and flavours
- Placement and management consultancy services
- Training and educational institute
- Energy efficient pumps
- Beauty parlour and crèches.
- Auto repair services, and garages.
- X-ray clinics
- Equipment rental and leasing
- Photographic lab
- Servicing of agricultural farm equipment including tractor, pump repairing, ring boring machine
- Back-office operation relating to computerised data
- STD/ISD booths
- Retail trade business with low capital
- Multi channels dish cable TV With dish antenna
- Laundry and dry cleaning
- Toughened metallic ware
- Automotive electronic component products
- Electronic surveillance and security
- Mechanical engineering like steel almirahs, cocks, and valves, wire cutters, etc.
- Engineering and fabrication
- Recorders, VCRs, radios, transformer, motors, watches
- Micronutrients for plants
- Active pharmaceutical ingredients and ayurvedic products
- Khadi products and hosiery products
- Handicraft activities like spinning, weaving, artisans
- Printing and other products made of paper
- Coir industry
- Furniture and wood products
- Poultry farm
- Bicycle parts
- Stationery items
- Call centre
- Rubber products
- IT solutions like creating a server bank, application service provider, smart card customisation, etc.
- Testing labs for industries
- Auto businesses such as auto parts components like horn buttons, door channels, wiper blade components, battery cell tester
- Ceramics and glass products include roofing tiles, glass flooring tiles, granite, etc.
- Retail and wholesale business
You can visit the official Udyam portal website for more information on the businesses considered as MSME.
What is a NIC Code?
If your business falls under any of the categories mentioned in the list above, you can get your business registered and benefit from the Udyam portal. To register your business under MSME segment you need an NIC code. Let us understand what NIC Code is.
A must-have when filing your company’s registration, the National Industrial Classification Code (NIC) refers to a code that is used for Udyog Aadhaar registration. This can be in the form of a 2 to 3 digit number. While the 2 to 3 digit code represents the group of business activities, the 4 digit code represents a class of business activity and the 5 digit code represents a subclass of the business activity.
What are the businesses that do not fall under MSME?
As discussed above, not all businesses come under the purview of MSMEs. The MSME Ministry has listed that the organisations that are not directly dealing with manufacturing of goods or are offering services will not come under MSME. This is because the main aim of MSME is to provide support to emerging businesses with benefits and subsidies. Accordingly, the following activities are not covered under MSMED Act, 2006:
- Gambling and betting activities
- Forestry and logging
- Fishing and aquaculture
- Trade/repair of motorcycles (wholesale and retail)
- Retail trade except of vehicles and motorcycles
- Activities of households for domestic personnel
- Goods and services produced via private households for personal use
- Activities of extraterritorial organisation and bodies
Top 5 popular industries that come under MSMEs
- Food products
- Fabricated metal products
- Machinery & equipment
To sum up: How to take your business to the next level
The classification of businesses under MSME has helped businesses avail various government benefits and get access to multiple government loans and financing schemes and promotions. There are several collateral free loans that MSMEs can avail to grow their business that includes MUDRA Loan under PMMY, Stand-Up India Scheme, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), etc.
In case you need assistance to take your MSME business to the next level or find growth opportunities, register your business on Tata nexarc – a B2B growth platform to enable emerging businesses in India find new opportunities to grow their business seamlessly.