MSME Insurance: Simplified

As per MSME Ministry data, there are about 6.3 crore MSMEs in India, which provide employment to approximately 11.10 crore and contribute to about 27% to the country's GDP, which is again 45% of the manufacturing output and over 40% of both direct and indirect exports.

- Paresh Nath Karmakar

Micro, Small and Medium Enterprises (MSMEs) are key components of every economy. The MSME sector generates lakhs of employment and significantly contributes to the GDP of the country.

As per MSME Ministry data, there are about 6.3 crore MSMEs in India, which provide employment to approximately 11.10 crore and contribute to about 27% to the country's GDP, which is again 45% of the manufacturing output and over 40% of both direct and indirect exports.

Criteria for classification of MSMEs enterprises:

i) A Micro enterprise where the investment in Plant and Machinery does not exceed Rs. 1crore and turnover does not exceed Rs.5 crore.

ii) A Small enterprise where the investment in Plant and Machinery does not exceed Rs.10 crore and turnover does not exceed Rs.50 crore.

iii) A Medium enterprise, where the investment in Plant and Machinery does not exceed Rs.50 crore and turnover does not exceed Rs. 250 crores.

The location of these enterprises includes rural and semi urban cities. The location makes the business susceptible to various risks like Fire, Flood, Storm, Earthquake, Burglary etc. It is to be ensured that these business models are risk free and under insurance coverage and help sustain business.

Insurance coverage in this sector is way behind and enterprises require insurance coverage as a safety net for their business to withstand business risk and remain resilient to unannounced dangers that often hamper running enterprises which are operating often on lesser financial strength. A report by the National Institute for Micro, Small and Medium Enterprise (NI-MSME) reveals that less than 10% of these enterprises have adequate insurance coverage, leaving them vulnerable to various risks.