Excessive regulation burdening MSMEs, slowing growth: CAG

NEW DELHI: Comptroller and Auditor General K Sanjay Murthy on Thursday raised his concern on excessive regulatory burdens that impede the competitiveness of micro, small and medium enterprises (MSMEs) and slow down industrial growth.

“MSMEs-related reforms need to cut across multiple departments and levels of government — Centre, state, and local bodies,” Murthy said, and added that the effectiveness of reforms depends not only on policy intent, but on the coordination among departments, digital system integration, uniformity in implementation, and citizen and business feedback loops.




The CAG’s remarks came while addressing a gathering of senior officials from the Centre and states from departments of MSMEs, statistics and industry representatives from CII, FICCI, Assocham, Phdcci and Fisme on auditor’s ongoing pan-India audit of ease of doing business for MSMEs.

“We need a four-pronged strategy of simplification, digitalisation, decriminalisation, and elimination of redundant laws — all of which are highly relevant for MSMEs,” he said. The CAG said that ease of doing business and ease of living have become priority audits for the federal auditor, cutting across departments, geographies and sectors.

The meeting was part of the auditor’s consultative process for its pan-India horizontal audit on ease of doing business (EoDB) for MSMEs being undertaken. Murthy further said that while the Centre has embarked on a comprehensive initiative to promote EoDB through systematic compliance reduction and deregulation, the real test of reforms lies in the last-mile outcomes. “The audit seeks to assess whether systems are delivering what they ought to,” he said.

Murthy said “the MSME sector is not only critical for economic growth, but also for inclusive development, supporting entrepreneurship, strengthening supply chains, and creating livelihoods across rural and urban India”.

The pan-India horizontal audit is outcome-oriented public sector auditing, aligned with national priorities and focused on improving service delivery for MSMEs. It will cover the period from 2021-22 to 2025-26, with field audits. The insights from this audit are expected to support governments in refining reforms, reducing compliance burdens and creating a more predictable, transparent and facilitative business environment, enabling MSMEs to focus on productivity, innovation and growth, according to CAG.

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