The Cabinet on Monday raised the turnover limit for companies to be considered small businesses eligible for government support.

The government has raised the upper limit for inclusion in this Micro, Small and Medium Enterprises (MSMEs) category by a factor of 50 to Rs 250 crore. This means that it may well cover around 70 per cent of the listed universe, showed an analysis of their sales data. There are 4,643 listed companies for which data is available on corporate data provider Capitaline. Around 20 per cent would fall under the definition under the turnover limits for medium enterprises. Another 19 per cent fall under small and 30 per cent under micro-enterprises.

Not all companies had declared results for the financial year ending March 2020 (FY20). Turnover figures for the previous year were used when FY20 numbers were unavailable. There are additional criteria on investments into such firm and exclusion of certain kinds of turnover but these back-of-the-envelope numbers give a broad sense of the expansive nature of the new definition.

“It has also been decided that 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,” the note said.

Companies that fall under the definition of an MSME have the advantage of requiring payments within a fixed time period, besides government support noted Pune-based company secretary Gaurav N. Pingle.

“There would be many benefits,” he said.

The Cabinet on Monday approved Rs 20,000 crore in the capital for stressed MSMEs. It expects the move to help 200,000 such enterprises. It also mentioned other steps such as the preference to MSMEs by disallowing global tenders in procurements of up to Rs 200 crore. The government and public sector units have to clear their dues in 45 days. Steps to assist the segment had been announced previously as well.

The turnover limits may well seem even more generous if one considers the impact of the Covid-19 pandemic. Analysts have widely expected the lockdown to control the disease to have a significant impact on the turnover of a number of companies.

India’s GDP is likely to contract two per cent in FY21, according to a June 1 India Economic Watch research report from financial service firm Bank of America Corporation. A month of continued slowdown will cost it 100-200 basis points (1-2 per cent) in growth, according to India Economists Indranil Sen Gupta and Aastha Gudwani.

“The government has extended the nationwide lockdown to June 30 with further relaxations (as Unlock 1.0). We estimate that a month's slowdown will cost 100-200bp of GDP and the six-week restart to shave off about 60 basis points. If the economy is kept in a semi lockdown phase until a vaccine is found, then India's GDP will likely contract by 5 per cent in FY21,” it said.

The government statement on the enhanced threshold had said that there are more than 60 million such enterprises. They account for 29 per cent of the country’s gross domestic product (GDP), a measure of economic activity. They contribute to almost half of India’s exports and employ 110 million people.