MSMEs account for 31.1% of GDP, 35.4% of manufacturing output

It outlines reforms to the MSMED Act, 2006, aimed at reducing payment delays, simplifying compliance, and strengthening dispute resolution mechanisms for the MSME sector.

Who it concerns: Micro, Small, and Medium Enterprises (MSMEs), Central Public Sector Enterprises (CPSEs), State Public Sector Enterprises, buyers of goods and services from MSMEs, and the general public affected by MSME supply chains.

What the document says

• MSME classification is revised to be based on investment in plant/machinery/equipment and turnover, rather than just investment thresholds.
• Filing of the memorandum for registration is made free and voluntary for all MSMEs, with the Central Government notifying a national platform for this purpose.
• All Central Public Sector Enterprises (CPSEs) are required to settle invoices for goods and services procured from MSMEs through the Trade Receivables Discounting System (TReDS) platform.
• State Governments are empowered to establish multiple Micro and Small Enterprises Facilitation Councils (MSEFCs) and mandate their PSEs to use TReDS.
• Specific timelines are introduced for dispute resolution: mediation must be completed within 90 days, referral to arbitration within 30 days if mediation fails, and arbitral awards must be made within 90 days of completing pleadings.
• Courts are directed to pay at least 50% of the awarded amount to MSME suppliers if an application to set aside a decree or award remains pending for more than six months.
• Mediated settlement agreements or arbitral awards can be recovered as 'arrears of land revenue' through the District Collector or other notified authorities.
• Penal provisions for non-filing of registration or non-supply of information are decriminalized, replaced by warnings and penalties for subsequent offenses.
• Failure to report unpaid dues to MSME suppliers in annual accounts attracts a fine of at least ₹10,000.

Also in the document

• According to the Economic Survey 2025-26, MSMEs account for 31.1% of GDP, 35.4% of manufacturing output, and 48.58% of exports.
• As of August 2026, 9.16 crore MSMEs are registered on the Udyam platform, employing more than 40 crore people.
• The value of invoices discounted through the TReDS platform rose from ₹40,000 crore in 2022-23 to ₹3.47 lakh crore in 2025-26.
• 161 MSEFCs have been established across States and Union Territories to adjudicate payment delay disputes.
• The Online Dispute Resolution (ODR) Portal was launched in June 2025 to provide a low-cost digital mechanism for resolving delayed payment disputes.