Management Notes

Reference Notes for Management

Investment Limit of a Micro Enterprise under manufacturing sector does not exceed _____lakhs.

Investment Limit of a Micro Enterprise under manufacturing sector does not exceed _____lakhs.

 Options:

A. 10
B. 20
C. 25
D. 50

The Correct Answer Is:

  • C. 25

The correct answer is C. 25.

In India, a Micro Enterprise under the manufacturing sector is defined based on the investment limit in plant and machinery. This limit has been set by the government to classify different categories of enterprises, such as micro, small, and medium enterprises. Let’s delve into the details to explain why option C is the correct answer and why the other options are not accurate:

C. 25:

This option is correct. According to the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, a micro-enterprise in the manufacturing sector is one in which the investment in plant and machinery does not exceed 25 lakhs (or 25,00,000) Indian Rupees.

This specific investment limit distinguishes micro-enterprises from small and medium enterprises. This definition aims to provide various benefits and support to enterprises that fall within this category.

A. 10:

This option is not correct. The investment limit for a micro-enterprise under the manufacturing sector is 25 lakhs, as defined by the MSMED Act. An investment limit of 10 lakhs would classify an enterprise as a very small entity but not as a micro-enterprise in the manufacturing sector.

B. 20:

This option is not correct. A 20 lakh investment limit does not categorize an enterprise as a micro-enterprise under the manufacturing sector. In this case, it would typically be considered as a small enterprise or an enterprise with a slightly higher investment capacity.

D. 50:

This option is not correct either. An investment limit of 50 lakhs exceeds the limit set for a micro-enterprise under the manufacturing sector. Enterprises falling within this range would typically be classified as small or medium enterprises, as per the MSMED Act.

The classification of enterprises into micro, small, and medium categories based on their investment in plant and machinery is crucial for several reasons, particularly for governments and financial institutions:

1. Access to Subsidies and Incentives:

Different categories of enterprises are often eligible for various subsidies, incentives, and benefits provided by the government. Micro-enterprises may receive more tailored support suited to their scale of operations.

2. Lending and Finance:

Financial institutions use these categories to determine lending terms and interest rates for enterprises. Micro-enterprises often enjoy preferential terms due to their smaller scale.

3. Government Procurement:

In many countries, governments allocate a certain percentage of their procurement budget to micro and small enterprises to promote their growth and participation in the economy.

4. Simplified Compliance:

Smaller enterprises typically face less stringent compliance requirements, making it easier for them to operate and grow.

5. Data Collection and Policy Development:

Categorizing enterprises helps governments gather data on the distribution and health of businesses in the country, aiding in the development of policies that support economic growth and employment.

The MSMED Act of 2006 in India has provided a clear framework for defining and categorizing enterprises based on their investment in plant and machinery, and this has been an essential step in promoting entrepreneurship and small business growth in the country.

In conclusion, the correct answer is C. 25 because a micro-enterprise in the manufacturing sector, as defined by the MSMED Act of 2006 in India, is one in which the investment in plant and machinery does not exceed 25 lakhs (25,00,000) Indian Rupees.

The other options are not correct because they do not align with the specific investment limit outlined in the legislation, and they would classify the enterprise as a different category, such as small or very small.

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