India’s manufacturing MSMEs are facing an overwhelming regulatory burden, with compliance costs ranging between Rs 13 to Rs 17 lakh per year, according to a new report by TeamLease RegTech. Titled ‘Decoding Compliance for Manufacturing MSMEs in India’, the study highlights the high volume, complexity, and cost of adhering to India’s regulatory landscape for small businesses.As per news agency ANI, the report reveals that a typical manufacturing MSME operating in a single state must comply with over 1,450 regulatory obligations annually across seven categories of law. This includes managing 48 different registers, facing 59 types of inspectors, and adhering to 486 imprisonment clauses—many of which are linked to procedural violations.“The compliance burden is not only intricate but also expensive,” said the report, adding that labour laws alone contribute to 66% of all imprisonment-related clauses, exposing MSMEs to significant legal risks for minor missteps.TeamLease RegTech CEO Rishi Agrawal emphasised the need for regulatory reform. “The data reflects an urgent need for reimagining compliance for unshackling India’s MSME entrepreneurs,” he was quoted as saying by ANI, pointing to the success of India’s Digital Public Infrastructure (DPI) in transforming payments. “We need to add compliance to India’s DPI stack,” he added.The report also noted the dynamic nature of India’s regulatory environment, with an average of 42 legal updates per day. In FY 2024-25 alone, there were 9,331 regulatory changes across different ministries, departments, and authorities. Around 90% of these changes directly impact MSMEs, which make up a massive 6.45 crore enterprises in the country.These findings align with concerns raised by entrepreneurs on MSME Day, which was on Saturday (June 27), designated by the United Nations to recognise the sector’s role in advancing Sustainable Development Goals.Quoted by ANI, Vasu Naren, CMD of Sona Machinery, flagged poor supply chains, low-quality output, and inadequate digital connectivity as critical hurdles in sectors like food processing. “Smart trade infrastructure and real-time electronic platforms must become the new norm in the MSME sector,” he said, urging greater government support for trade fairs and digital outreach to help MSMEs expand into international markets.Others echoed similar concerns. Shabnum Khan of 750AD Healthcare pointed to the urgent need for R&D support and data privacy frameworks, while Dinesh Chandra Pandey of Shankar Fenestrations cited difficulties in finding skilled labour and the pressure from rising raw material costs.IT-based MSMEs also lack effective incubation support. “Government-led incubators often focus on theory, while private ones offer hands-on mentoring, operational guidance, and funding,” said Abhinav Rao, CEO of ParentVerse.The cumulative feedback paints a picture of a sector full of potential but constrained by outdated processes, excessive criminalisation, and fragmented regulatory oversight. As the report highlighted, such burdens restrict formalisation, limit employment growth, and stifle innovation.Entrepreneurs and industry experts are now calling on policymakers to streamline regulations and create a more enabling ecosystem to let India’s MSMEs thrive and contribute meaningfully to the country’s growth story.
