ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Need for Developing a New Taxonomy for MSME

The Case for Nano-enterprises

This article looks at the asymmetry embedded within the classification of micro, small and medium enter­prises that distorts equitable policy attention to the sector. Around 99% of MSMEs are microenterprises, and within micro, almost 70% consists of “tiny” units, often called nano-enterprises. It then examines the historical evolution of these classifications and their numerical arbitrariness, and shows that the taxonomy needs to be revised.

 

The authors would like to thank Pradnya Godbole for her valuable insights as well as Vrushali Katikar and Anshika Kushwaha for their suggestions on an earlier draft of the article.
 

A significant part of the Indian industrial landscape is made of micro, small and medium enterprises (MSMEs). MSMEs contribute about 45% of the manufacturing output, more than 40% of exports, and over 28% of the gross domestic product (GDP) while creating employment for about 11.1 crore people, which in terms of volume stands next to the agricultural sector (RBI 2019). By fostering entrepreneurship and generating significant employment opportunities at relatively lower capital costs than industries, MSMEs play a crucial role in economic development (Ministry of Micro, Small and Medium Enterprises 2021).

A key feature about the MSMEs as an industrial and policy category is the heterogeneity in terms of their sizes, products and services delivered, access to finance channels, and marketing and technology deployed. These characteristics differ not just across the categories but vary greatly within each of the categories. This is despite the fact that policy intervention for smaller firms requires different provisions and tools, and if categorised faultily, much of the intended benefits would be wasted.

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Published On : 20th Jan, 2024

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