Opinion | The next phase of reforms to strengthen MSMEs

1. The Micro, Small and Medium Enterprises (MSMEs) Development Amendment Bill, 2026, recently passed by both Houses of Parliament, is a very significant reform and an important step in strengthening the MSME ecosystem. MSMEs make a significant contribution to the development of the nation. Over the past few years, the MSME sector has established new dimensions of growth and development. Today, more than 9 crore MSMEs are registered on the ‘Udyam Registration Portal’, providing employment to 40 crore people. MSMEs contribute 31% to our economy and 50% to exports. The MSME sector has a major role to play in realising the vision of ‘Viksit Bharat’ envisioned by Hon’ble Prime Minister Shri Narendra Modi, particularly by contributing to economic growth, employment and exports. MSMEs are the driving force of India’s development and are central to the country’s economic progress. The remarkable progress made by the MSME sector in recent years is clearly reflected in the steady rise in the number of enterprises registered on ‘Udyam’, which has increased from 1 crore 65 lakh on April 1, 2023, to more than 9 crore, marking a substantial expansion in the formal registration of MSMEs.

2. In 2020, the classification of micro, small and medium enterprises was made more comprehensive and inclusive by eliminating the distinction between the manufacturing and services sectors. Under this framework, a composite criterion based on both turnover and investment was developed. Subsequently, in 2025, the investment limits for micro, small and medium enterprises were increased two-and-a-half times to ₹2.5 crore, ₹25 crore and ₹125 crore, respectively, while the turnover limits were doubled to ₹10 crore, ₹100 crore and ₹500 crore, respectively. These changes have encouraged these enterprises to increase capital investment, expand their businesses, strengthen their operations and adopt technology, thereby supporting their growth.

3. Availability of finance is the most important component of the growth of the MSME sector. The Ministry has continuously worked to increase the availability of bank credit to the MSME sector and to strengthen the flow of institutional finance, and significant and encouraging results are now visible. Outstanding credit extended to MSMEs, which stood at ₹10 lakh crore in 2014-15, has now increased to more than ₹38 lakh 35 thousand crore. The Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) provides guarantees on loans extended to micro and small enterprises. Through this mechanism, credit guarantees provided to micro and small enterprises amounted to ₹3 lakh 14 thousand crore between 2000 and 2022, which increased to more than ₹10 lakh 43 thousand crore during the last four years, from 2022-23 to 2025-26, demonstrating the substantial expansion of credit support available to these enterprises. Under the Prime Minister’s Employment Generation Programme (PMEGP), margin money subsidy amounting to ₹24,903 crore has been provided to approximately 8 lakh 34 thousand micro enterprises from financial year 2014-15 till now, creating estimated employment opportunities for 75 lakh people and providing further support to employment generation at the grassroots level.

4. Under the MSME Ministry’s Public Procurement Policy for Micro and Small Enterprises, 2012, it is mandatory for Central Ministries/Departments and Central Public Sector Enterprises (CPSEs) to procure 25% annually from micro and small enterprises. This includes 3% procurement from micro and small enterprises owned by women entrepreneurs and 4% from those owned by SC/ST entrepreneurs, thereby ensuring dedicated opportunities for these categories within public procurement. Public procurement from micro and small enterprises has increased consistently over the years, reflecting their growing participation in government procurement. The value of public procurement from micro and small enterprises, which stood at ₹40,717 crore in financial year 2020-21, increased substantially to ₹1,15,801 crore in financial year 2025-26, which is more than 49% against the 25% procurement target set for CPSEs. Of this, procurement worth ₹3,984 crore was made from enterprises owned by SC/ST entrepreneurs, while procurement worth ₹9,059 crore was made from enterprises owned by women entrepreneurs.

5. To ensure timely payments to MSMEs, the Ministry has undertaken several meaningful initiatives to address this issue, one of which is TReDS (Trade Receivables Discounting System). It is a digital platform regulated by the Reserve Bank of India (RBI), launched in 2017 with the objective of addressing the liquidity challenges and working capital requirements of MSMEs in India. Through the TReDS platform, the MSME sector has received timely payments through invoice discounting worth ₹8,71,000 crore as of March 2026. The number of MSMEs connected to the TReDS platform, indicating wider participation in the mechanism, increased from 34,430 in April 2022 to more than 2,55,000 by March 2026. At the same time, the value of invoice discounting by MSMEs increased from ₹40,000 crore in 2021-22 to more than ₹3,47,000 crore in the financial year 2025-26. The growing trend of invoice discounting on TReDS reflects the Government of India’s commitment to timely payments to MSMEs and to addressing their liquidity and working capital needs.

6. In the same direction, 161 Micro and Small Enterprises Facilitation Councils (MSEFCs) have been established across the country for the settlement of delayed payments and related disputes. The amendment introduces provisions to enable states to determine the composition of MSEFCs, so that such councils can be constituted as required and the institutional mechanism for resolving disputes can be strengthened. Adequate mechanisms for dispute resolution have also been provided through mutual agreement among the concerned parties. The Amendment Bill also enables and strengthens Online Dispute Resolution (ODR), so that disputes between the concerned parties can be resolved in a timely and cost-effective manner.

7. The Ministry of MSME is fully committed to promoting the development of women entrepreneurs. Several schemes of the Ministry contain special provisions for women. Today, more than 39% of MSMEs on the Udyam Portal are owned by women, which means that nearly 3.38 crore MSMEs are under women’s ownership, and their number continues to grow steadily, reflecting the increasing participation of women in entrepreneurship. Under the Credit Guarantee Scheme, guarantee coverage of up to 90% is available for women, while a concession of up to 10% is provided in the annual guarantee fee. Under the Procurement and Marketing Support Scheme, 100% subsidy is provided for the participation of women entrepreneurs in trade fairs, compared with 80% for other entrepreneurs. Under PMEGP, there is a provision for providing a subsidy of 35% to women in rural areas and 25% to women in urban areas.

The development of Scheduled Caste and Scheduled Tribe communities is a priority for the Ministry. Today, more than 1.24 crore MSMEs on Udyam are owned by entrepreneurs belonging to the Scheduled Caste and Scheduled Tribe communities. The National SC-ST Hub Scheme is a Central Sector Scheme of the Ministry of MSME, which was launched by the Hon’ble Prime Minister in 2016. The objective of this scheme is to enhance the capabilities of SC/ST entrepreneurs and promote an ‘entrepreneurship culture’ among them and enable greater participation of SC/ST entrepreneurs in the MSME sector.

8. To further strengthen these continuous initiatives and efforts of the Ministry, the MSME Development Amendment Bill, 2026, has been passed. Its objective is to address the existing challenges faced by the MSME sector, improve the administrative framework, promote ease of doing business and encourage compliance with regulations while reducing unnecessary difficulties for enterprises. Its main components are:

i. Provision for notifying a national digital platform for free and voluntary registration of micro, small and medium enterprises. It also gives statutory recognition to the classification of MSMEs based on turnover and investment.

ii. Addressing liquidity-related problems faced by MSMEs. It has been made mandatory for all Central Public Sector Enterprises (CPSEs) to settle invoices for purchases from MSMEs through TReDS. State governments have also been empowered to adopt similar provisions for their public sector undertakings.

iii. Enabling state governments to rationalise the composition of Micro and Small Enterprises Facilitation Councils (MSEFCs) and facilitate the establishment of additional MSEFCs.

iv. Prescribing a time limit for the speedy resolution of disputes related to delayed payments to micro and small enterprises.

v. Providing for the recovery of settlements arrived at through mediation or arbitral awards as arrears of land revenue.

vi. Empowering courts to order payment of at least 50% of the amount awarded to micro and small enterprise suppliers if an application seeking to set aside a decree, award or order has remained pending for more than six months.

vii. Decriminalising certain violations of provisions and replacing conviction-based penalties with graded penalties, including a warning for a first-time violation.

The amendment has been made after extensive consultations with stakeholders and careful examination of the issues concerned. A strong MSME sector is essential for achieving inclusive, sustainable and employment-oriented economic growth. These amendments are in line with the Government’s commitment to the vision of ‘Viksit Bharat 2047’ and its objective of building a stronger, more inclusive and sustainable economy. They will promote the formalisation of enterprises, pave the way for their expansion and enable them to emerge as ‘champions’ of growth.

(The author is the Minister of State in the Ministry of Micro, Small and Medium Enterprises and the Ministry of Labour and Employment.)