Micro, Small, and Medium Enterprises (MSMEs) are business entities that are classified based on their investment in plant and machinery or equipment and their annual turnover. The classification criteria for MSMEs may vary from country to country, but here is a general definition commonly used in India:

  1. Micro Enterprises: Micro enterprises are the smallest category of businesses. The criteria for classification differ between manufacturing and service sectors:
    a. Manufacturing Sector: Micro enterprises in the manufacturing sector are defined as businesses with an investment in plant and machinery not exceeding INR 1 crore (approximately USD 134,000).
    b. Service Sector: Micro enterprises in the service sector are defined as businesses with an investment in equipment not exceeding INR 10 lakh (approximately USD 13,400).
  2. Small Enterprises: Small enterprises are slightly larger in scale compared to micro enterprises. The classification criteria are as follows:
    a. Manufacturing Sector: Small enterprises in the manufacturing sector are defined as businesses with an investment in plant and machinery between INR 1 crore and INR 10 crore (approximately USD 134,000 to USD 1.34 million).
    b. Service Sector: Small enterprises in the service sector are defined as businesses with an investment in equipment between INR 10 lakh and INR 2 crore (approximately USD 13,400 to USD 268,000).
  3. Medium Enterprises: Medium enterprises are the highest category within the MSME classification. The criteria for medium enterprises are as follows:
    a. Manufacturing Sector: Medium enterprises in the manufacturing sector are defined as businesses with an investment in plant and machinery between INR 10 crore and INR 50 crore (approximately USD 1.34 million to USD 6.7 million).
    b. Service Sector: Medium enterprises in the service sector are defined as businesses with an investment in equipment between INR 2 crore and INR 5 crore (approximately USD 268,000 to USD 670,000).

The classification of MSMEs is crucial as it determines the eligibility for various government schemes, incentives, subsidies, and support aimed at promoting and nurturing these small and medium-sized businesses. It also helps in understanding the economic contribution and impact of MSMEs in a country’s economy.