New MSME Norms Open Doors to Faster Payments and Bigger Markets

The Government of India has introduced revised definitions for MSMEs, effective from the new financial year, with the aim of expanding business opportunities and easing access to institutional benefits. Announced via a notification dated 21 March, the new framework raises the thresholds for investments in plant and machinery, as well as turnover, thus bringing a larger pool of enterprises under the MSME umbrella.

A key impact of this reclassification is the inclusion of many medium-sized businesses in the small enterprise category. This allows them access to platforms like the Government e-Marketplace (GeM) — a portal for the public procurement of goods and services — and dispute resolution services, especially in the context of delayed payments. Until now, the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006 granted access to such services only to micro and small enterprises, often excluding those officially categorized as medium-sized.

Delayed payments continue to be one of the most persistent challenges facing MSMEs, particularly when smaller firms are dealing with large corporate buyers. In response, the government has encouraged wider use of the Micro and Small Enterprises Facilitation Councils (MSEFCs), which offer resolution mechanisms including arbitration, conciliation, and mediation. According to data from the Samadhaan platform, out of ₹28,398 crore in dues across 92,794 registered cases, only ₹8,740 crore worth of disputes had been resolved through 50,507 cases as of 12 March. This highlights the need for both broader access and greater efficiency in resolving payment disputes.

The revised definitions also aim to enhance MSMEs' participation in public procurement. Under existing policy, all government departments and public sector undertakings are mandated to procure at least 25% of their requirements from micro and small enterprises, and the new definitions could increase the number of firms eligible to meet this quota.

In the Union Budget for 2025–26, Finance Minister Nirmala Sitharaman underscored the importance of redefining MSMEs to foster greater scalability, support technological advancement, and improve access to capital. While the changes are expected to benefit a wide array of businesses, they also raise questions about how effectively the ecosystem — including platforms like GeM and mechanisms like MSEFCs — can adapt to serve a larger and more diverse set of enterprises.

The move marks a significant policy shift aimed at empowering MSMEs. However, its success will likely hinge on robust implementation and continued support to ensure that intended benefits reach businesses on the ground.