Critical barriers, including crippling regulatory delays, high compliance costs and a lack of effective single window systems, are holding back micro, small and medium enterprises from realising their potential, industry lobby Assocham said on Thursday.
Citing its report titled "Ease of Doing Business in the Indian States," the industry lobby called for accelerated, state-driven reforms to empower micro, small and medium enterprises (MSMEs). The report outlines the major regulatory and infrastructural bottlenecks that continue to hinder business operations across key Indian states.
These include cumbersome and overlapping approval processes; GST-related hurdles, including complex registration procedures, refund delays and frequent ITC disputes; logistics and infrastructure bottlenecks - including e-way bill inefficiencies, and unreliable electricity supply in states like West Bengal and Odisha, which cause delays and production losses.
Moreover, company law and BIS rules burden MSMEs with complex compliance, exit and certification delays, while unclear FSSAI norms, especially for biotech products, add further regulatory uncertainty, according to the report.
It emphasised that digitised and time-bound single window systems can be a game-changer in improving the investment climate across states. It called for their urgent implementation in states like West Bengal, Odisha and Andhra Pradesh, where the current systems are fragmented and often function as "multiple windows", replacing them with streamlined processes that have fixed approval timelines and clear accountability. Beyond state-level systems, the report proposes a major overhaul of the national compliance architecture for small businesses.
A key recommendation is the introduction of a single, consolidated annual MSME compliance form that combines multiple filings, like AOC-4, MGT-7A, DIR-3 KYC, MSME Form-I, and DPT-3. It also suggests moving registered MSMEs under the Companies Act to biennial or triennial filing cycles to ease the administrative burden significantly.
The report advocated for a graded penalty structure and exemptions from mandatory audits for smaller enterprises. It identified legal and regulatory challenges affecting the national business ecosystem. The report highlighted a range of regulatory and infrastructural issues encountered in Odisha, West Bengal, Maharashtra, Haryana, Andhra Pradesh, Telangana, Kerala, Tamil Nadu, Punjab, Himachal Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttarakhand, Gujarat & Dadra and Nagar Haveli, Goa, J&K and Madhya Pradesh.
The report also brought out sector-specific issues in land, building & construction, labour, environment, trade, taxation and utilities, among others. It called for aligning central and state-level reforms to accelerate economic growth and incorporated actionable recommendations from industry stakeholders.
The report recommended streamlined approvals, GST reforms, time-bound land-use conversion, flexible labour laws and rationalisation of company-related regulations. The report called for infrastructure improvements and standardisation of processes, a simplified e-way bill regime, dedicated logistics hubs and upgraded electricity distribution with structured industry feedback.
It vouched for supporting MSMEs beyond compliance through skill development, technology adoption, innovation, export promotion and greater scheme awareness. "By addressing these issues, the government can build a predictable, transparent, and efficient business environment," said the report.
Also read: Assocham report calls for unified agri-tech ecosystem
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