Parliament passes MSME Development (Amendment) Bill

• The Parliament passed the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026 on August 7.

• The Bill seeks to address the current challenges faced by the MSME sector by improving the administrative structure and facilitating payment mechanisms.

• The Micro, Small and Medium Enterprises Development Act, 2006 was enacted for facilitating the promotion, development and enhancing the competitiveness of micro, small and medium enterprises. 

• MSMEs are the key drivers of economic growth, generate employment and foster innovation. 

• Over the years, the micro, small and medium enterprises landscape has undergone a change due to technological advancements, emergence of information technology enabled systems and changing legal landscape which require that the Act be amended to facilitate growth of micro, small and medium enterprises.

MSME sector in India

• The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy contributing around 30 per cent of India’s GDP and over 48 per cent of India’s exports. 

• It contributes significantly to the economy and social development of the country by fostering entrepreneurship and generating large employment opportunities at comparatively lower capital cost, next only to agriculture.

• There are over 8.7 crore formally registered MSMEs under the Udyam Registration portal.

• The MSME sector in India is responsible for providing employment to 40 crore people.

• MSMEs are complementary to large industries as ancillary units. This sector contributes significantly to inclusive industrial development of the country. 

• By fostering entrepreneurship, generating employment and promoting inclusive development, MSMEs continue to drive economic transformation at the grassroots level.

What are the key amendments?

• The amendments in the Act have been done to strengthen the legal framework governing the development of MSME sector, improving the ease of doing business, creating an enabling business environment through decriminalisation, providing institutional mechanisms for promotion of MSMEs and addressing delayed payment issues faced by the MSMEs.

• MSME classification based on twin criterion of “investment in plant/machinery” and “turnover” has been incorporated in the Act. 

• The amendment provides for Online Dispute Resolution to ensure that micro and small enterprises are able to resolve their disputes in a timely and cost-effective manner. It mandates the courts to order for payment at least 50 per cent of the awarded amount to the micro and small enterprises suppliers, if the application to set aside decree, award or order is pending for more than six months.

 • The amendment introduces timelines to ensure faster adjudication of delayed payment disputes.  

• All Central Public Sector Enterprises (CPSEs) to route the settlement of invoices through a Trade Receivables Discounting System Platform (TReDS) for procurement of goods and services from MSMEs. 

• The composition of Micro and Small Enterprises Facilitation Councils (MSEFCs) has been rationalized to enable State governments to establish multiple MSEFCs for faster disposal of disputes regarding payments due to micro and small enterprises. The amendment also empowers the state governments to make rules for MSEFCs.

• Earlier, under the MSMED Act, non-filing of registration or non-supply of information was penalised with conviction and a fine. Now, the penal provisions have been decriminalised. In the instances of furnishing wrong information, a warning will be issued in the first instance, and a penalty will be levied in case of second and subsequent instances.

(The author is a trainer for Civil Services aspirants.)