Difference Between Micro, Small and Medium Enterprises

Posted on: 2021-11-25 03:14:09

Introduction to MSME

The term MSME stands for micro, small, and medium enterprises. Companies in India come segregated into the aforementioned groups. The classification is done based on their nature, turnover, and scale of investment. It is the MSME Act of 2006 that governs the same.

Furthermore, companies fall into two groups – services and manufacturing. Business owners these days register themselves as MSMEs in Udyam and NSIC (National Small Industries Corporation) and get the benefits provided by the Indian government for such companies. These steps are helping them grow by providing them the support that they need to such an extent. Most of the benefits offered are in the shape of policy steps and easy credit. The aim is to make sure that these businesses can grow properly.

The Types of MSMEs

The three types of MSME enterprise are available in India such as:

  1. Micro enterprises
  2. Small enterprises
  3. Medium enterprises

And further, the MSMEs are classified into two sectors as per their business nature such as:

  1. MSMEs into Manufacturing Industry
  2. MSMEs into Services Industry

As has been said already, MSMEs are categorized into two major groups – manufacturing and services. The manufacturing MSMEs are engaged in producing and manufacturing goods. It can be for any industry as long as specified in the first schedule of the Industries (Development and Regulation) Act, 1951. It could be for using machines and plant equipment as a part of the process of value addition.

The service-based MSMEs take part in rendering or providing services. They also have a properly defined investment in the equipment that they use.

What is a Micro Enterprise?

You can see micro-enterprises everywhere around you. It includes the likes of the ice cream parlour in your neighbourhood and the café near your college that you visit quite a lot. These are small businesses that have limited capital and very few people working for them.

Usually, a micro-enterprise would not hire more than ten people to work for it. As we have said already, the capital investment in micro ventures is minimal. In a developing country such as India, micro-enterprises represent the lion’s share of the business sector.

These companies add a lot of value to the economy of a country by creating jobs. They help people earn more money than they otherwise would have. They also lower the overall cost that is necessary to do business in India.

If you closely look at the entrepreneurs of India, you will see that most of them work in this particular stratum. The biggest reason is that they lack the extensive money necessary to start a big corporation straight off the bat.

What is a Small Enterprise?

Small enterprises are small businesses. They are also businesses that employ a limited number of people, and their turnover is likewise as well since they do not have the high volume of sales that the companies bigger than them have.

In technical terms, you can say that these companies are owned independently. Hence, they operate similarly. The thing with these companies is that they are limited in terms of their revenue and size. In this case, a lot depends on the industry growth and scale as well.

Most of the small businesses are sole proprietorships privately owned, partnerships, and one person company. Every industry in India has small enterprises. They have vast diversity in this respect, starting from convenience stores to smaller manufacturing plants. It could be the bakery in your locality that employs around ten people or a manufacturing unit with 50 people on its payroll.

Some other examples of such enterprises are illustrated below:

  • Restaurants
  • Dry cleaners
  • Law firms
  • Architectural and engineering firms
  • Hotels

These enterprises also differ in terms of factors, such as size, regulatory authorization, and revenues, to name a few. In some of these small businesses, you need only a business license to do the work. An example of such a business would be a home-based accounting business.

In some other cases, small businesses have to deal with some specific regulations. Examples of such businesses include day-care centres, retirement homes, and orphanages.

What is a Medium Enterprise?

A medium company is primarily one that employs no more than 250 people. It is only when the small companies grow steadily and slowly that they become medium companies. Even as such a company earns more money it starts to save money that it needs to invest in various parts of its business such as technology, infrastructure/ buildings, recruiting and up-skilling more employees, and equipment. It eventually acts as a bridge between big corporations and small businesses.

The Difference between Micro, Small, and Medium Enterprises

The difference between the micro, small, and medium enterprises is in the total investment made in these enterprises and the turnover they get in a year. To make it clear, they are discussed as below:

Distinction of MSMEs in  Terms of Investment and Annual Turnove

MSME Classification

Micro Enterprises

Small Enterprises

Medium Enterprises

Manufacturing and Services Enterprises

Investment: Maximum Rs. 1 crore

Turnover: Not more than Rs. 5 crore

Investment: Maximum Rs. 10 crore

Turnover: Not more than Rs. 50 crore

Investment: Maximum Rs. 50 crore

Turnover: Not more than Rs. 250 crore

The Role Played by MSMEs in the Economy

As we have said already, micro, small, and medium enterprises are all around us. These include small outlets and stores in your neighbourhood and the bigger franchise stores and grocery store chains. They employ so many people around the country to work for them – they create jobs important in this day and age.

So, this is the contribution that they are making to the economy of India. Apart from that, they also pay taxes, which add to the money earned by the national government. Some of them earn revenue in foreign exchange as well.


The good thing with starting such a business is that you have a lot of help coming your way. For example, you have companies that help you with all the documentation and official procedures necessary for incorporating the same. We BusinessWindo can help you to overcome all the difficulties related to business matters like company formation, management and accounting services and also help you get the loan you need to get such a business off the ground.


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