The Union Government, in a bid to save the interests of small and medium segment, redefined FDI cap on manufacturing items reserved for SMEs. Now, foreign entities can not hold more than 20 per cent share in such units without the approval of the of the Foreign Investment Promotion Board (FIPB), according to a clarification made by the department of industrial policy and promotion-called Press Note 6 of 2009.

Government has reserved 21 items for small and medium entrepreneurs - including bread, wooden furniture, stainless steel utensils, steel chairs safety matches and steel furniture. Moreover, it was also clarified that manufacturers of reserved items must have an industrial license, subjected to certain conditions.

Micro units are also redefined under the new act, according to which the units with total investment of Rs 25 lakh will be considered micro units; while units investing between Rs 25 lakh and Rs 5 crore will be deemed as small scale units.

The move clears the air about the ambiguity arising after enactment of the new law in 2006 - named the Small and Medium Enterprises Development (SMED) Act. There were widespread confusions in the market regarding the definition of small scale industry, under this act.