Why can’t some MSMEs scale if policy is on their side? The ET MSME Awards 2025 had answers

The mood at the ET MSME Awards 2025 was cautiously optimistic. Headwinds such as manufacturing stress, credit gaps, and compliance overload exist, yes, but the policy architecture is shifting fast enough that the sector's champions believe the tide may finally be turning.

Dr. Subhransu Sekhar Acharya, CMD of the National Small Industries Corporation (NSIC), set the tone in his address. Acknowledging that MSMEs aren't operating in easy times, he was quick to pivot to the opportunity. The last Union Budget had been unambiguous: agriculture, exports and MSMEs are India's three growth pillars on the road to Viksit Bharat by 2047.

Here are some numbers he cited. The Self-Reliant India Fund, set up in 2021 as a fund-of-funds mechanism, has already attracted nearly seven times its drawdown, well beyond its four-times crowding-in target. A freshly announced ₹10,000 crore MSME Growth Fund is expected to extend this momentum. The objective, Acharya said, is graduation.


““Micro must become small, small must become medium, and medium must become large,” he underlined.

The Trade Receivables Discounting System or TReDS reforms now recognise invoices as asset-backed securities, improving working capital access. And the Trade Enablement and Marketing (TEAM) Initiative aims to onboard 500,000 MSMEs onto digital marketplaces, with half expected to be women-led enterprises. "MSMEs are already significant contributors to India's economy, and their role will only grow further," he added. "No other sector matches the MSME sector in its ability to generate employment at scale."

But the panel that followed, titled ‘From Red Tape to Red Carpet: Reimagining Ease of Doing Business for SMEs’ brought sharper friction to the conversation.

Rishi Agrawal, Co-founder-CEO of TeamLease Regtech and Co-chair of the CII National Task Force for Ease of Doing Business, opened with a structural critique: "India's compliance regime is built more on distrust of entrepreneurs than on risk management."

He laid out the scale of the problem. There are roughly 1,500 total compliance obligations for a single entity, with a significant share carrying imprisonment clauses, many triggered not by serious wrongdoing but by filing delays and procedural lapses. The result is a system that produces what he called economic dwarfs: businesses that survive without ever scaling. "India doesn't need more enterprises. It needs more formal enterprises connected to capital, technology and growth," he stressed.

Visakhapatnam MP Sribharat Mathukumilli brought a lawmaker's perspective to the table. The Jan Vishwas Bill 2.0 has expanded from 288 provisions to roughly 800 across dozens of laws, potentially the largest decriminalisation exercise of its kind. But legislation alone won't fix it. "The implementation gap is really about incentives in the system," he said, pointing to officials who face no reward for efficiency and no penalty for delay. His prescription was to reduce human discretion through technology: "AI and digitisation can reduce human discretion and cut corruption at the frontline."

Pankaj Chadha, Chairman of EEPC India, focused on a tension many exporters live with daily. GST has delivered real gains such as faster IGST refunds and better working capital cycles, but digitisation has also multiplied notices, audits, and interpretation disputes. His sharper concern, though, was credit ratings. MSMEs seeking finance are routinely benchmarked against the largest players in their sector; a small steel company measured against corporate giants will almost never qualify as investment-grade. Without BBB-and-above ratings, businesses face steeper collateral demands and remain effectively shut out of bill-discounting platforms. The rating framework, he argued, is structurally rigged against smaller firms.

Abhay Sinha, DG of the Services Export Promotion Council (SEPC) added a dimension that doesn’t get heard as much. "MSME discussions are still too manufacturing-centric, while services face a different and often overlooked set of problems," he said, pointing to place-of-supply complications, talent attrition, absence of usable sectoral data, and the persistent conflation of 'services' with just IT.

Ponnuswami M, Chairman and Managing Director of Pon Pure Chemicals India, offered the most grounded note of the session. Progress is real, he said; states are competing to reduce friction, and approval timelines have improved in several places. The remaining gap is simpler and, in theory, more fixable: "Awareness is still a major gap. Many MSMEs do not know what support systems already exist."

The through-line, if one emerged, belonged again to Agrawal: "Decriminalisation, deregulation and digitisation have to move together." One without the others, the session made clear, won't move the needle.

The ET MSME Awards had IDBI Bank as the Banking and Lending Partner, The New India Assurance Co. Ltd. as the General (Non-Life) Insurance Partner, and CareEdge Ratings as the Evaluation Partner.