How NITI AAYOG’s proposed reforms can unlock the nation’s trillion dollar growth opportunity

Overview

India’s MSME sector contributes nearly 30% to GDP, accounts for 40% of exports, and employs over 60% of the workforce. Despite their role in leading India as the third-largest economy in 2025, the sector faces consistent challenges, including limited access to formal credit, a timely need for working capital, and delayed payments, which further restrict growth, straining supply chain ecosystems.

Recent comprehensive studies and reports by NITI Aayog, in collaboration with the Institute for Competitiveness, highlight these systemic issues and outline 17 key reforms to simplify regulations, improve credit availability, and enhance liquidity management for MSMEs and corporates. These reforms address widely recognised gaps, where only 19% of MSME credit demand is met formally, and compliance costs continue to rely on small and medium enterprises. Henceforth, the committee has put forward these transformative reforms to ease these challenges and revitalise the sector. These reforms aim to harmonise financial discipline, ease compliance burdens, and accelerate cash flow for MSME-corporate collaboration.

Unified Approach to Transform India’s MSME and Corporate Ecosystem

The NITI Aayog-led committee, chaired by Rajiv Gauba, has proposed a transformative set of 17 reforms on 17 November, 2025, to significantly reduce the regulatory and financial pressures on MSMEs while aligning corporate responsibilities to build a resilient, inclusive economy. The proposal emphasises a collaborative ecosystem in which MSMEs gain easier access to credit and streamlined compliance, while corporates play a proactive role in digitising payables and strengthening supplier relationships by adopting RBI-regulated TReDS platforms. Further, emphasises embracing digital platforms as scalable, efficient solutions for managing payables and receivables, and focuses on expansion.

For MSMEs: Unlocking Growth through Enhanced Access and Efficiency

To address long-standing payment delays, the committee proposes amending the MSME Development Act to enforce mandatory pre-appeal deposits of 75% of arbitral awards. Additionally, it mandates the partial release of at least 50% of dues to micro and small enterprises after 6 months, accelerating working capital access and reducing liquidity risks for MSMEs.

These reforms aim to increase productivity, improve liquidity, reduce compliance burdens, and foster an innovative ecosystem, all of which are steps toward achieving a multi-trillion dollar economy and the ambitious “Viksit Bharat 2047” vision.

For Corporates: An Imperative for Expansion

The proposed reforms explicitly direct large corporates with turnovers exceeding ₹250 crore to adopt RBI-regulated Trade Receivables Discounting Systems (TReDS) platforms to fuel expansion:

Large corporates are encouraged to harness technology-driven trade receivables discounting platforms, such as DTX by KredX, to ensure transparent, efficient procurement and payment processes that benefit the entire value chain.

De-risking the Supply Chain

At the core of these reforms is simplifying operations to ensure smooth, predictable capital flow throughout the supply chain. Tax procedures and compliance under the Companies Act are to be simplified for MSMEs, reducing administrative burdens and enabling enterprises to focus resources on innovation and growth. Arbitration reforms mandating pre-appeal deposits and partial release of disputed payments will provide MSMEs with quicker liquidity and reduce uncertainties around cash flow challenges, enabling them to focus on expansion. Beyond immediate liquidity, the proposal outlines that technology is a key to achieving the long-term Viksit Bharat 2047 vision. The recent report projects that widespread AI adoption will add $500-$600 billion to India’s GDP by 2035. [Source: NITI Aayog. (2025)]

The report specifically highlights

• Accelerating AI Adoption: Using AI to bridge 30-35% of the growth gap needed for aspirational GDP targets.
• Transforming R&D: Utilising generative AI to accelerate breakthroughs in critical manufacturing and pharmaceutical sectors.
• Mission Digital ShramSetu: A proposed mission to make AI accessible and impactful for India’s 490 million informal workers, overcoming structural constraints.

Driving Inclusive Finance for a Resilient Economy

The reforms outlined by NITI Aayog underscore a critical shift: digital, compliant trade finance platforms are indispensable to bridging MSME financing gaps, reducing supply chain risks, and fostering sustainable economic growth. Both corporates and MSMEs must align to leverage TReDS to access liquidity faster, reduce capital costs, and build resilient, future-ready supply chains. In essence, this proposes an integrated framework in which regulatory simplification, technological adoption, and financial risk sharing unlock a trillion-dollar growth opportunity for India, securing the future of MSMEs and fortifying corporate supply chains.