Micro Small and Medium Enterprises: Key Difference and Impact

• June 22, 2025June 23, 2025

The Indian startup ecosystem is filled with micro small and medium enterprises. Commonly abbreviated to MSME, they form a solid foundation for economic growth. As the Indian economy crosses a GDP of 4.3 trillion USD, the contributions of MSME are significant.

Recently, in the Union Budget of 2025-26, the investment and turnover rate have been raised. The government aims to streamline credit access, promote labour-intensive industries and support first-time entrepreneurs. In this blog, we will explore the difference between micro small and medium enterprises and how it affects the Indian economy.

Difference Between Micro, Small and Medium Enterprises

The government has revised the threshold for micro small and medium enterprises in the Union Budget 2025-26.

• Micro Enterprises: Those which have an investment of Rs. 2.5 crores and a turnover of Rs. 10 crores are considered micro-enterprises.
• Small Enterprises: They are classified with Rs. 10 crores in investment and Rs. 100 crores in turnover.
• Medium Enterprises: This enterprise has an investment of Rs. 125 crores and a turnover of Rs. 500 crores in a financial year.

Below is a tabular representation of micro small and medium enterprise turnover limits:

Rs in crores	Micro	Small	Medium
Investment	2.5	10	125
Turnover	10	100	500

Examples of MSMEs

Micro enterprises consist of those businesses which do not require extensive labour. Examples include street stores, independent shoemakers, local bakery shops, etc.

On the other hand, small businesses are slightly bigger in scale than micro-enterprises but smaller than medium businesses. They primarily invest in the workforce. Examples include local stationery shops, candle manufacturers, local water suppliers, etc.

Medium enterprises comprise a large workforce and hefty investments. However, they are not as big as corporations or multinational companies. Examples of medium businesses are manufacturers and wholesalers.

Impact of MSME on the Indian Economy

The MSME sector is the bedrock of our economy. Its contribution to India’s economy has grown from 27.3% in 2020-21 to 30.1% in 2022-23. With various government initiatives backing the sector, let’s explore its massive impact on the Indian economy.

• Employment Generation

Micro small and medium enterprises provide numerous job opportunities in both urban and rural areas. This bridges the gap between urban and rural populations. Moreover, as the country battles a rise in unemployment, MSMEs generate job opportunities.

• Entrepreneurship

The MSME industry has contributed to the growth of entrepreneurship in India. They are the breeding grounds for Indian entrepreneurs. By developing new services and products, they increase the country’s GDP. Moreover, it also enhances people’s skills in an increasingly competitive job market, allowing better opportunities for many.

• Inclusivity

There is a popular belief that the rich are getting richer and the poor are getting poorer. However, MSMEs include workers from both urban and rural areas. This bridges the gap between the rich and the poor. Moreover, it improves the standard of living in underserved areas.

• MSME Loans

The Indian MSME industry is steadily growing as the young generation enters the workforce. However, in order to step into the world of entrepreneurship, capital is required. Whether you are a corporate worker or a rural farmer, MSME loans are for everybody.

Kogta Financial understands its importance and provides exciting loans for MSME funding. We cater to the various needs of the business and ensure accessibility to rural and urban regions.

How to Apply for an MSME Loan?

If you want to apply for an MSME loan, follow the below steps:

Step 1: Click on the ‘Apply Now’ button.

Step 2: This will take you to a page where you put your basic information. Enter your name, contact details and email id.

Step 3: Select ‘MSME loan’ in the product section.

Step 4: Authorise a Kogta Finance representative to contact you and discuss your business needs in detail.

Step 5: Complete the captcha and submit the form.

Eligibility Criteria

To apply for an MSME loan, you need to meet certain criteria. You need to have a minimum of 3 years of experience in your business. Moreover, whether you are a retailer, trader, manufacturer, self-employed or job worker, this business loan is for everyone with a dream of starting their own business.

Documents Required

Although the required document changes according to the scheme chosen, you will need income proof, business proof, photo identity proof, address proof and property proof.

To prove your income, you will need the latest version of:

• Last 6 months’ bank statement
• ITR
• Audited financial
• GST returns

For business proof, you will need:

• Certificate of Practice (COP)
• VAT Registration
• Sales Tax
• Shop Act License

To photo identity proof, prepare any two of the following documents:

• Aadhaar Card
• Voter ID Card
• PAN Card
• Passport
• Driving License

For address proof, you will need:

• Electricity bill
• Telephone bill
• Passport
• Bank account statement
• Driving license
• Ration card
• Property purchase agreement

Lastly, for proof of property, prepare the following documents:

• Latest tax receipt
• Sanction plan
• Title deed

Features of MSME loans

Micro small and medium enterprise loans have distinct features. Let us discuss them below:

1. MSME loans are available on all properties and span across industries
2. The loan amount starts from Rs. 1.5 lakhs.
3. The repayment tenure can be as long as 10 years. This is flexible and depends upon your business.
4. MSME loans have transparent and hassle-free processing charges

Conclusion

Micro small and medium enterprises form the backbone of India’s economy. It generates employment, boosts exports and supports industrialisation. The government offers extensive support for these enterprises and banks and non-banking financial institutions, too, provide loans with attractive interest rates. Are you an entrepreneur or planning to start your own business? Kogta Financial offers a suite of financial products for up-and-budding MSMEs. Apply now and start your entrepreneurship journey today!