Table of content

1.0    Introduction

2.0   Regulation of MSME Sector in India

3.0   Establishing an MSME

4.0   Registration and filing procedures

5.0    Entrepreneur’s Memorandum (EM)

6.0    Compliance with applicable legislation and obtaining necessary approvals and clearances

7.0    Foreign Direct Investment (FDI) in MSME

8.0    Programmes and schemes for the benefit of the MSME Sector


Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country.


The Sector consisting of 36 million units, as of today, provides employment to over 80 million persons. The Sector through more than 6,000 products contributes about 8% to GDP besides 45% to the total manufacturing output and 40% to the exports from the country. The MSME sector has the potential to spread industrial growth across the country and can be a major partner in the process of inclusive growth.


Khadi is the proud legacy of our national freedom movement and the father of the nation. Khadi and Village Industries (KVI) are two national heritages of India. One of the most significant aspects of KVI in Indian economy is that it creates employment at a very low per capita investment. The KVI Sector not only serves the basic needs of processed goods of the vast rural sector of the country, but also provides sustainable employment to rural artisans. KVI today represent an exquisite, heritage product, which is ‘ethnic’ as well as ‘ethical’. The Sector has a potentially strong clientele among the middle and upper echelons of the society.


Coir Industry is an agro-based traditional industry, which originated in the state of Kerala and proliferated to the other coconut producing states like Tamil Nadu, Karnataka, Andhra Pradesh, Odisha, West Bengal, Maharashtra, Assam, Tripura, etc. It is an export oriented industry and has greater potential to enhance exports by value addition through technological interventions and diversified products like Coir Geo textiles etc. The acceptability of Coir products has increased rapidly due to its ‘environment friendly’ image.


Ministry of Micro, Small & Medium Enterprises (M/o MSME) envisions a vibrant MSME sector by promoting growth and development of the MSME Sector, including Khadi, Village, and Coir Industries, in cooperation with concerned Ministries/Departments, State Governments, and other Stakeholders, through providing support to existing enterprises and encouraging the creation of new enterprises.

Source: Ministry of Micro, Small and Medium Enterprises, Annual Report 2014-15

At the Central, State and Local Government level, there is a strong institutional structure in place for promoting and developing the MSME sector and for providing a wide range of support services. Types of support services include assistance in technology up gradation, marketing tools, finance availability, infrastructure and skill development.

The administration of the MSME sector falls under the jurisdiction of the Ministry of Micro, Small and Medium Enterprises (Sukshma Laghu Aur Madhyam Udyam Mantralaya), of the Government of India. It designs and implements policies and programmes through its field organizations and attached offices for promotion and growth of MSME sector. The Ministry of MSME has two Divisions called Small & Medium Enterprises (SME) Division and Agro & Rural Industry (ARI) Division.

The Office of the Development Commissioner -MSME (DC-MSME) is an attached office of the Ministry of MSME, and is the apex body to advise, coordinate and formulate policies and programmes for the development and promotion of the MSME Sector. It functions through a network of Development Institutes, Regional Testing Centres, Footwear Training Institutes, Production Centres, Field Testing Stations and specialized institutes. There are 30 MSME Development Institutes (MSME – DIs) and 28 Branch MSME Development Institutes set up in the State capitals and other industrial cities all over the country. Other than that, the Ministry has various Attached Offices, Field Offices, PSUs and other organizations.

An entrepreneur wishing to set up a MSME can first form a company under the Companies Act 1956 or establish any other form of business organisation by registering with the Registrars of Companies (ROC) appointed under Section 609 of the Companies Act, 1956, vested with the primary duty of registering companies floated in the respective States and Union Territories and of ensuring that such companies comply with statutory requirements under the Act.

There are various forms of doing business in India viz. Sole proprietorship, Hindu-Undivided-Family, Partnership Firm, Limited Liability Partnership, Cooperative Society, Private Limited Company, Public Limited Company etc. The choice of form of business will depend on the activity for which the business is being set up and various other ancillary factors.

After that manufacturing or service enterprises which are classified as micro, small or medium enterprise depending on their amount of investment in plant & machinery may seek registration under MSMED Act 2006.

The Ministry of MSME is not involved in registration process of MSME’s. Registration under the MSME Act 2006 is done by enterprise filing the Entrepreneurs’ Memorandum (EM) with the jurisdictional District Industries Centre of its area.

After getting registered, an enterprise is allotted a MSMED registration/ entrepreneurs memorandum (EM) number. The EM number is a 12-digit number where the first two boxes are for State/UT code, next three boxes are for District code, sixth and seventh boxes are for category of enterprise (sixth box for indicting manufacturing or service and seventh box for indicating micro or small or medium) and last five boxes are for EM number).

The enterprise should get the EM number printed on letter heads, invoices, bills, supply order sheets and other necessary documents. Also after registration, an enterprise can seek financial credit and also other facilities like land, industrial set-up, and water/electricity/telephone connections etc.