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Q71 (IAS/2023) Economy › Industry, Infrastructure & Investment › Industrial policy reforms Official Key

Consider the following statements with reference to India : 1. According to the 'Micro, Small and Medium Enterprises Development (MSMED) Act, 2006', the 'medium enterprises' are those with investments in plant and machinery between ₹ 15 crore and ₹ 25 crore. 2. All bank loans to the Micro, Small and Medium Enterprises qualify under the priority sector. Which of the statements given above is/are correct?

Result
Your answer: —  ·  Correct: B
Explanation

The correct answer is Option 2.

Statement 1 is incorrect: Under the MSMED Act, 2006 (as per the revised criteria effective from July 1, 2020), the definition of MSMEs is based on a composite criterion of investment and turnover. For a Medium Enterprise, the investment in plant and machinery or equipment must not exceed ₹50 crore and the annual turnover must not exceed ₹250 crore. The figures mentioned in the statement (₹15 crore to ₹25 crore) do not align with the current statutory definitions.

Statement 2 is correct: According to the Reserve Bank of India (RBI) guidelines on Priority Sector Lending (PSL), all bank loans to MSMEs that conform to the definitions of the MSMED Act, 2006, qualify for priority sector classification. This includes loans for both manufacturing and service sectors, aimed at ensuring adequate credit flow to these vital segments of the economy.

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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. Consider the following statements with reference to India : 1. According to the 'Micro, Small and Medium Enterprises Development (MSMED)…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 5/10 · 5/10
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Statement 1 is a standard static update (the 2020 MSME definition change) that every serious aspirant must memorize. Statement 2 is a 'Trap Breaker'—it uses the extreme word 'All', which usually signals an error, but in the specific context of RBI Master Directions for PSL, it is technically correct. This question rewards precision over blind elimination tricks.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
What are the investment-in-plant-and-machinery thresholds for micro, small and medium enterprises, and specifically for medium enterprises, under India's Micro, Small and Medium Enterprises Development (MSMED) Act, 2006?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 7: Indian Economy after 2014 > Micro; Small and Medium Enterprises Development (MSMED) Act 2006 > p. 236
Presence: 5/5
“As per the recent changes, the new classification/definition of MSMEs is: • Classification: ; Micro: Investment < 1 cr; Small: Investment < 10 cr; Medium: Investment < 50 cr • Classification: Manufacturing &; Micro: And; Small: And; Medium: And • Classification: Services; Micro: Turnover < 5 cr; Small: Turnover < 50 cr; Medium: Turnover < 250 cr • Classification: ; Micro: ; Small: ; Medium: • Further, the Turnover with respect to exports will not be counted in the limits of Turnover for • any category of MSME units whether Micro, Small or Medium. This will help in bringing more • units under MSME classification even if their exports are more.”
Why this source?
  • Directly lists numeric investment thresholds for enterprise categories: Micro, Small, Medium.
  • Gives the specific medium-enterprise investment cutoff (50 crore) needed to answer the question.
  • Also distinguishes investment-based classification from turnover-based limits (useful context).
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