MSMEs is a concept and classification of enterprises in India, standing for Micro, Small, and Medium Enterprises. The structured legal framework for this classification was established by the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, which came into force in October 2006. The Act was enacted to promote, develop, and enhance the competitiveness of these enterprises, replacing the earlier system of Small-Scale Industries (SSI) and providing the first legal framework for both manufacturing and service entities.
The mechanism for classification is a composite criterion based on both investment and annual turnover, with the distinction between manufacturing and service sectors removed in July 2020. The criteria were significantly amended and came into force on April 1, 2025, via a notification from the Ministry of MSME on March 21, 2025. Under the revised criteria, a Micro Enterprise has an investment up to ₹2.5 crore and turnover up to ₹10 crore. A Small Enterprise has an investment up to ₹25 crore and turnover up to ₹100 crore, and a Medium Enterprise has an investment up to ₹125 crore and turnover up to ₹500 crore.
The Act connects to the Ministry of Micro, Small and Medium Enterprises (M/o MSME), which oversees its administration. Key provisions include the establishment of the National Board for Micro, Small and Medium Enterprises (NBMSME) and a mechanism in Chapter V and Chapter VI to protect MSMEs from delayed payments. This mechanism mandates that a buyer must pay within a maximum of 45 days, failing which they are liable to pay monthly compounded interest at three times the bank rate. The Act also repealed the earlier Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertaking Act, 1993. Enterprises register on the Udyam Registration portal to avail benefits.