Revised MSME Classifications in India: A Pathway to Enhanced Financial Inclusion and Policy Acces

ABSTRACT: The Micro, Small, and Medium Enterprises (MSME) sector is crucial in the context of India’s growth, economic development, productive employment, and balanced growth. The year 2020 saw the Government of India unveiling a new classification of MSMEs, which integrated the services sector with manufacturing for the first time as well as altered investment and turnover limits. This review article analyses the implications of the revised classifications on the financial access and policy access gaps within institutional support frameworks for these enterprises. The paper attempts to demonstrate through government documents, RBI reports, and SIDBI’s MSME Pulse reports how the enhanced thresholds allow a greater number of enterprises to meet the criteria for MSMEs, with associated benefits of credit, subsidies, and government assistance programs. The review notes greater access to formal credit for small and medium enterprises, as well as wider participation in MSME policies post-reclassification, but also lacks awareness from micro-enterprises and institutional barriers to credit allocation as some of the enduring challenges. This paper seeks to evaluate, using empirical evidence, whether the reclassification has inclusively integrated the MSME’s micro level into formal financial systems, economically justifying the classification revision and, at the same time, providing policy recommendations for fostering sustainable development.