What MSMEs are

Micro, small and medium enterprises (MSMEs) are a vital link in India's industrialisation. They add to production, employment and exports, and they make good use of local materials and skills.

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 gave one common framework for defining these enterprises and for helping them with credit, marketing and technology. It covers both manufacturing and service enterprises: a small digital marketing agency can be an MSME too.

An enterprise is classed by two measures: its investment in plant and machinery (or equipment) and its turnover. The limits, raised from April 2025, are:

Micro enterprises make up about 99.4 per cent of all MSMEs.

Two older groups are also part of small business:

• Village industries are located in rural areas, produce goods or services with or without power, and have a limit on capital investment per worker.
• Cottage industries (also called rural or traditional industries) use traditional skills and simple tools, usually with family members working at home. They are not defined by any capital investment limit.