An economy to grow completely and to the maximum keeping in view, the development of people belonging to all the income groups needs to focus on various or all the type of commercial establishments irrespective of size, turnover, profit, and employment opportunities they are creating. In a diverse economy like India, which has a varied history, ruled by various colonial powers, has a huge population coming across from various ethnic groups, regions and income groups has led to the formation and continuation of commercial ventures of various types.
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From a country and its economic policies’ point of view, it is very much necessary to categorize all the functioning entities under particular heads, so that rules and development policies can be made pertaining to them which suits and help in the development of all establishments under them. It is an impossible task from the government’s point of view to study millions of entities, understand their problem and forms various economic policies, tax policies and rules pertaining to them. Keeping in view this problem, the concerned authorities shifted their focus to cluster-based development. It means entities having certain features in common were put under one head and the development policies were made for all them keeping in view their similar nature. This step led to the formation of MSMEs i.e. micro, small and medium enterprises.
As per the concerned act MSMEs bifurcated entities under two heads, one engaged in production, processing or preservation of goods and another one in rendering services. In the first categories establishment were furthers subdivided, based on their investment in plant and machinery. If their investment is not more than 25 lacks its microenterprise, if its more than 25 lacks but not exceeding 5 cr its small enterprise and if its more than 5 crores but not exceeding 10 crore its medium Enterprise. In the second category, if the investment in equipment of concerned establishment is not exceeding 10 lacs its micro Enterprise, if it is more than 10 lac but not exceeding 2 crore its small enterprise and if it’s more than 2 crores but not exceeding 5 crore its medium Enterprise.
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The above-mentioned are the criteria decided by the concerned law of legislation. The concept of cluster-based development led to the enactment of this act thereby forming the above-mentioned 3 types of enterprises. The aforementioned concept led the government focus on these entities of the economy which has small investment but they contribute a major share to GDP, national income, and employment opportunities since as a whole since they are large in no and widely scattered. Given a strong attention and support of strong and wisely made related development policies, MSMEs will grow further and will really add unexpected value to National development.