CAG suggests four-pronged strategy for MSMEs

The Comptroller and Auditor General of India (CAG) on Thursday suggested a four-pronged strategy – simplification, digitalisation, decriminalisation, and elimination of redundant laws – for the benefit of Micro, Small and Medium Enterprises (MSME) sector.

At a conclave on ‘Pan-India Horizontal Audit on Ease of Doing Business (EoDB)’ for MSMEs, CAG K. Sanjay Murthy said the sector was not only critical for economic growth, but also for inclusive development, supporting entrepreneurship, strengthening supply chains, and creating livelihoods across rural and urban India.

Stating that excessive regulatory burdens impede the competitiveness of enterprises and slow down industrial growth, he said MSME-related reforms needed to cut across multiple departments and levels of government – Centre, State, and local bodies.

“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,” he said.

The CAG chief said public procurement by MSMEs had seen a major increase which highlighted the scale and importance of procurement-related compliance audits. “The MSME audit presented is one of the first detailed block-level audits, but similar thematic audits will continue nationwide. EoDB and Ease of Living are priority audit themes for CAG, cutting across departments, geographies (Centre, States, local bodies), and sectors,” said Mr. Murthy.

He said focus should be on data-driven audits and decision-making, as credible data inputs were essential for effective policy formulation. “Government initiatives show significant progress, and auditors are guided to focus on areas backed by strong data trends rather than routine compliance audits alone,” he noted, highlighting the need for sharing innovative best practices across States to improve efficiency and standardisation of similar schemes.

MSME Secretary S.C.L. Das highlighted the recent positive collaborative progress by government and industry to reduce the compliance burden and vulnerabilities faced by small enterprises. Among the speakers were Ministry of Statistics and Programme Implementation Secretary Saurabh Garg and Team Lease Chairman Manish Sabharwal.

The Pan-India Horizontal Audit on EoDB for MSMEs represents an important step towards outcome-oriented public sector auditing, aligned with national priorities and focused on improving service delivery for MSMEs. The exercise will cover the period from 2021-22 to 2025-26, with field audit planned under the Annual Audit Plan 2026-27. The audit will be coordinated by the Office of the Principal Accountant General (Audit-II), West Bengal, as the Lead Office, with participation from all State Audit Offices.

It will cover relevant Central Ministries, State Departments, district-level institutions and State Public Sector Undertakings. 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, said a CAG statement.