India’s manufacturing MSMEs are grappling with an overwhelming regulatory burden, with compliance costs running as high as ₹17 lakh annually, according to a new report by TeamLease RegTech. The report, titled ‘Decoding Compliance for Manufacturing MSMEs in India’, paints a picture of excessive procedural obligations and outdated frameworks hampering growth for small businesses in the sector.
The report found that a typical manufacturing MSME operating in just one state faces over 1,450 regulatory obligations every year. These span seven categories of law and include managing 48 different registers, undergoing inspections from 59 authorities, and navigating 486 imprisonment clauses—many tied to minor procedural lapses. Labour laws alone account for two-thirds of these penal provisions.
Calls for systemic compliance reform grow louder
TeamLease RegTech CEO Rishi Agrawal called for a reimagining of the compliance ecosystem, urging that “compliance be added to India’s Digital Public Infrastructure stack,” echoing the transformative impact of UPI. The report highlights that India’s regulatory landscape sees an average of 42 updates per day. In FY 2024–25 alone, 9,331 regulatory changes were issued, with nearly 90% directly affecting MSMEs.
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The timing of the report—released around MSME Day on June 27—further amplified calls from entrepreneurs across sectors. Sona Machinery CMD Vasu Naren pointed to poor supply chains and weak digital connectivity as major hurdles. Shabnum Khan of 750AD Healthcare urged support for R&D and data privacy frameworks, while Dinesh Chandra Pandey of Shankar Fenestrations highlighted rising raw material costs and lack of skilled labour.
Entrepreneurs demand a simpler and supportive ecosystem
Startups in the IT space, like ParentVerse, have also flagged the gap in effective incubation. CEO Abhinav Rao noted that public incubators are often theoretical, while private ones offer actionable guidance, funding, and operational support. Across industries, MSME leaders expressed frustration at excessive criminalisation and a fragmented compliance system that deters formalisation and restricts job creation.
The findings make clear that India’s small manufacturers—despite being engines of employment and innovation—remain bound by regulatory overhangs that stifle productivity and risk-taking. Entrepreneurs are now calling for urgent policy simplification, better enforcement standards, and a single-window compliance platform to enable the sector to thrive and contribute more effectively to India’s economic goals.