MSMEs Drowning in Regulatory Web: A Need for Reform

Small and midsized enterprises (MSMEs) in India are battling steep regulatory compliance costs, with annual expenditures estimated between Rs 13-Rs 17 lakh, as per a recent report by Regulatory Technology (Regtech) solutions firm TeamLease Regtech. The report, titled 'Decoding Compliance for Manufacturing MSMEs in India,' dissects the complex regulatory framework involving licences, approvals, registrations, and permissions that MSMEs must manage throughout their operational journey.

The findings indicate that a standard manufacturing MSME operating a single unit in one state faces over 1,450 compliance obligations each year, spanning seven legal categories. This includes interactions with 59 types of inspectors and maintaining 48 different registers, alongside grappling with 486 imprisonment clauses, many for procedural errors. The report underscores the intricate and costly compliance landscape, where annual costs range from Rs 13 to Rs 17 lakh, overwhelming enterprises with limited resources and expert manpower.

Highlighting the excessive criminalisation inherent in India's labour laws, which account for 66 per cent of all imprisonment-linked compliance, the report echoes this year's Economic Survey pointing to regulatory burdens hampering formalisation, labour productivity, job growth, and innovation. Rishi Agrawal, Co-Founder and CEO, TeamLease RegTech, calls for an urgent overhaul of compliance frameworks to support MSME entrepreneurs, advocating for integration with India's Digital Public Infrastructure to alleviate these burdens.

(With inputs from agencies.)