MSME rules next month, focus on global value chains

The Ministry of Micro, Small and Medium Enterprises (MSME) in New Delhi plans to announce new rules next month to regulate small businesses. These rules will focus on streamlining invoice financing through the Trade Receivables Discounting System (TReDS), making small businesses more cost-competitive, improving quality, and integrating them more deeply into global value chains.

Bharat Khera, MSME secretary, stated these objectives. The rules will detail the functioning of TReDS, including onboarding processes for buyers and suppliers, and invoice processing and routing. Khera also mentioned that the ministry will offer support to smaller enterprises that may struggle with the TReDS system. The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2026, recently passed by Parliament, aims to reduce delayed payments to MSMEs by introducing faster dispute-resolution timelines, enhancing recovery mechanisms, and improving liquidity for small businesses.

This legislation requires central public sector enterprises to settle procurement invoices from MSMEs through TReDS and empowers courts to order payment of at least 50% of awarded amounts to MSME suppliers if challenges remain pending for over six months. Khera emphasized that unless MSMEs become cost-competitive and meet quality standards, they cannot become part of global value chains.

MSMEs contribute around 31% to India's GDP, 35% to manufacturing output, and nearly 48% to exports. The MSME ministry will continue using its existing institutional mechanisms to monitor the amended law's implementation, with digital platforms expected to enhance effectiveness. Regarding delays in payments from the private sector, Khera noted that the government aims to avoid increasing the compliance burden on private industry and will instead encourage large companies through industry associations to ensure timely payments to MSME suppliers.