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What is a Small Business in India? 

If you google what is a small business in India, you’d find out that according to the MSME Ministry any service sector unit with an investment of INR 2 crore or less. Or a manufacturing unit with less than 5 crore investment in plant and machinery. 

Consider the keywords here — service unit, manufacturing unit, less than 2/5 crore investment. 

If you have any basic understanding of the Indian business ecosystem, you’d know that this definition itself is incomplete. 

Because in India, a dukaan, stall, kiosk, trading unit with limited capital (and mostly no property to its name) is also labeled a small business (chota vyaapar). Most of these are seen as independent units in the unorganized sector.

Maybe, that’s why small businesses find it hard to access capital, talent, and several other perks. They’re not ‘large’ enough in the business sense. Not clearly as big as registered startups (that promise hypergrowth to investors). 

But that’s the beauty of Indian small businesses. Most of it is unorganized.

Here’s what I think of a small business in India: 

An economic activity being performed with an intention of earning profit, by way of sale of products or services, in a small, single unit setup with limited access to capital is a small business in India. 

Sure, this definition is not perfect. But, business is not about perfection, it’s about practicality. 

Now, by this definition, I see every small shop owner or operator as a small business.

Though banking has touched almost everyone, and shop owners pay different kinds of taxes. But not everyone is GST registered even in 2022. The government doesn’t even want to register all businesses under GST. (Imagine the workload and the inconvenience for a small trader). 

You only need to register for GST when your turnover is more than INR 40 L in a financial year. Otherwise, you’re exempt from GST registration

Though, in terms of sales revenue this can feel as a pretty small amount. 

But if you have talked to any small business owner, you’d realize that they need not necessarily be selling this much worth of product or service in a given year.

Non-registered businesses, mostly in the small retail trade segment, have limited access to everything — capital, resources, marketing budget, and sometimes even ideas to grow. 

But this doesn’t mean they don’t want to grow and diversify, especially after COVID-19 which placed geographical restrictions on their business operations. 

If you're looking for small business resources online, have a look at this smallbiz lifeline page. You'll get a new perspective towards the 'informal' bazaars and their growth potential in India. 


Anmol Ratan Sachdeva

Anmol writes to help early-stage startups, businesses and aspiring entrepreneurs build, improve and grow their ventures.