Govt Pushes Legal Reforms for MSMEs to Enhance Ease of Doing Business, Says Official

At a recent roundtable hosted by the PHD Chamber of Commerce and Industry (PHDCCI) in New Delhi, Joint Secretary Ateesh Kumar Singh of the Union Ministry of Micro, Small and Medium Enterprises (MSME) called upon industry players to actively contribute data and insights to strengthen sectoral resilience. With MSMEs navigating an increasingly uncertain market environment marked by disruptions in global trade and domestic operations, the government aims to complement 2.0 initiatives with legal reforms to streamline compliance while meeting emerging obligations.

Singh emphasized the need for industry participation in shaping policies, stating that contributing to government datasets and sharing practical inputs will be crucial in building robust support mechanisms for MSMEs. He encouraged participants, particularly PHDCCI members, to provide ideas that could amplify the impact of ongoing initiatives.

India’s MSMEs, vital to GDP, exports, and employment, face a complex landscape of challenges including regulatory compliance, supply chain volatility, digital transformation and market uncertainties. Experts at the roundtable highlighted strategies for resilience. Rajan Sudesh Ratna, Deputy Head and Senior Economic Affairs Officer at the United Nations ESCAP, pointed to export diversification via government programs like Atmanirbhar Bharat, Digital India and Vocal for Local, as well as leveraging free trade agreements (FTAs) and digital adoption to sustain growth.

Murali Kallummal, Professor at the Indian Institute of Foreign Trade’s Centre for WTO Studies, underscored the need to redefine MSME classifications, improve data coverage of the informal sector, and develop interfaces linking MSMEs with Harmonised System (HS) codes to enhance FTA negotiations. Budget 2025 has already made a significant shift by revising the MSME definition: the turnover limit has doubled from Rs 250 crore to Rs 500 crore, and the investment threshold in plant and machinery has risen from Rs 50 crore to Rs 125 crore. This change enables mid-sized enterprises to access government subsidies, financing schemes and procurement benefits.

The roundtable also focused on the potential effects of GST 2.0 for MSMEs, which is expected to simplify compliance, reduce production costs, lower consumer prices, and stimulate both domestic trade and export diversification. PHDCCI Deputy Secretary General Jatinder Singh highlighted digital transformation and diversification as key enablers of efficiency and growth, while Narinder Wadhwa, Co-Chair of the Capital Market and Commodity Market Committee, emphasized resilience amid market volatility and new US tariffs.

The US-imposed 50% tariff on Indian goods, effective 27 August, presents immediate challenges for labor-intensive MSME sectors. Reports indicate that exports to the US could decline by nearly half this year, potentially affecting hundreds of thousands of jobs. Industries such as textiles, gems and jewellery, and seafood, which together account for about 25% of India’s US exports are expected to bear the brunt, while chemicals and auto components also face pressure.

Specific clusters like Tirupur (garments) and Surat (diamonds) are particularly vulnerable due to their high exposure to the US market. Despite this, opportunities for market diversification exist. The India-UK free trade agreement and potential EU deals could offer MSMEs new growth avenues, while rising domestic demand may partially offset export losses.

The discussion underscored that a combination of government-led reforms, market diversification, and digital adoption is critical for sustaining the growth and resilience of India’s MSMEs in a turbulent global economic environment.