MSME classification may soon be based on employment, turnover

Our Bureau Chennai | Updated on January 15, 2018

MSME Secretary KK Jalan

Small, micro sector form the backbone of job creation, says MSME Secretary

The government is looking beyond the criterion of capital employed to better define MSME sector for growth, according to KK Jalan, MSME Secretary, Government of India.

The conventional definition of micro, small and medium enterprises is based on different slabs of investments ranging from ₹10 lakh to over ₹5 crore.

However, with MSMEs constituting the backbone of employment generation, the government plans to include parameters such as employment generation and turnover in defining the sector.

The role of MSMEs in employment generation is being increasingly recognised. It is second only to agriculture in generating jobs, he said at a seminar on the role of MSMEs in enhancing Indo-US trade organised by the Indo American Chamber of Commerce and the FIEO.

In the WTO, for instance, developed countries are keen on bringing in a MSE forum in the context of the potential of the sector for job generation. While this is a welcome step, India is concerned on the possibility of labour issues becoming a non tariff barrier to markets, he said.

“India in not in favour of a MSE forum in the WTO because of concerns over labour issues,” Jalan said.

The major challenges facing the sector are credit flow, technology development, skilled human resource, regulatory compliance and affirmative action. The US can help Indian MSMEs in all these issues.

India can be a cost effective base for US MSME production emulating the automobile sector. An Indo-US forum for MSMEs would benefit mutual cooperation, he felt.

India’s public procurement order reserving 20 per cent for MSME sector is a part of affirmative action. The US has a well established system and “we are adopting some of those practices,” he said.

With the shift to GST around the corner, compliance cost is a major concern of the MSMEs as it does not distinguish between large and small companies. The authorities have recognised the issue and are addressing it.

Published on March 22, 2017

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