1. Understanding
Micro Small and Medium Enterprises Development Act 2006
relating to micro Enterprises
Jitesh Panda
Vrutti Livelihoods Resource Centre
4th May 09

2. Focus of MSME Act 2006
• To facilitate promotion and development of
micro Enterprises
• To enhance competitiveness of micro
Enterprises

3. Defining micro Enterprise
• In case of the enterprises engaged in the
manufacture or production of goods
– An Enterprise is defined as micro Enterprise where
the investment in plant and machinery does not
exceed twenty five lakh rupees;
• In case of the enterprises engaged in providing
or rendering of services
– An Enterprise is defined as micro Enterprise where
the investment in equipment does not exceed ten lakh
rupees

4. National Board for Micro, Small,
Medium Enterprises
Functions include
• Examining the factors affecting the promotion and
development of micro Enterprises
• Reviewing the policies and programmes of the Central
Government in regard to
– Facilitating the promotion and development
– Enhancing the competitiveness of such enterprises and the
– Impact on such enterprises;
• Recommend Government of India (GoI)– on above
matters
• Advise GoI on Use of Funds
Not less than Three Persons
representing associations of micro Enterprises to be Members of Board

5. Advisory Committee
Functions include:
• Examining matters referred by Board
• Recommend GoI on
– Level of employment in a class or classes of enterprises;
– Level of investments in plant and machinery or equipment, in a class or
classes of enterprises;
– Need of higher investment in plant and machinery or equipment for
• Technological upgradation
• Employment generation and
• Enhanced competitiveness of the class or classes of enterprises;
– Possibility of promoting and diffusing entrepreneurship
• Class of Enterprises includes micro Enterprises
One Representative of the Associations of Micro Enterprises
to be Ex officio Member

6. Indicative activities to promote
micro Enterprises
• Developing skill of employees, management and
entrepreneurs
• Provisioning for technological upgradation
• Providing marketing assistance
• Providing infrastructure facilities
• Cluster development of enterprises
• Strengthening backward and forward linkages
Focus on micro and Small Enterprises

7. Indicative activities to promote
micro Enterprises
• Credit services to be guided by guidelines or instructions
issued by the Reserve Bank to focus on
– Timely and smooth flow of credit
– Minimising the incidence of sickness
– Enhancing the competitiveness of such enterprises
• Preferential policies of Government in respect of
procurement of goods and services, produced and
provided by micro Enterprises
Focus on micro and Small Enterprises

8. Micro and Small Enterprises Facilitation Council
• To be constituted by State Government (s)
• Can be more than One Council – linking to
Place (s) or Area (s)
• One or more office-bearers or
Representatives of Associations of micro
Enterprises to be part of Council

9. Key Points
• Focus on micro Enterprises
• Focus on Representation of micro
Enterprises in different policy related
bodies
Would be good to know Impact of the MSME Act
relating to micro Enterprises

10. Key Challenges
• Presence of Association of micro Enterprises
• Linkages with Poverty Alleviation Schemes – NREGA, SGSY, Watershed,
etc
• Interface between Rural/Urban Development and promotion of Industries
• Inadequate linkages between micro, small, medium and large enterprises
• Inadequate focus on numerous (small) micro Enterprises – where
investment is in range of few Thousands
• Limited focus on facilitation Business Development Services (BDS) for
micro Enterprises – required for promotion of micro Enterprises

11. Thank you