Threshold-based relief for MSMEs must have sunset clauses

The threshold-based concessions and exemptions for the micro, small, and medium enterprises (MSME) sector create the unintended effect of incentivising enterprises to cap their sizes below the thresholds and therefore, must have sunset clauses, the Economic Survey 2023-24 said.

- HARSH KUMAR

An enterprise is classified as an MSME based on a set of criteria. A micro enterprise is where an investment in plant and machinery or equipment does not exceed ₹1 crore and turnover does not surpass ₹5 crore.

A small enterprise is where the investment in plant and machinery or equipment does not exceed ₹10 crore, and turnover does not exceed ₹50 crore.

And, in a medium enterprise, the investment in plant and machinery or equipment must not exceed ₹50 crore, and turnover should not surpass ₹250 crore.

The Survey said that MSMEs face extensive regulation, compliance requirements and significant bottlenecks with access to affordable and timely funding being some of the core concerns.

"Licensing, inspection and compliance requirements that MSMEs have to deal with, imposed particularly by sub-national governments, hold them back from growing to their potential and being job creators of substance," said the Survey.