New Delhi [India], June 29 : Small and midsized enterprises (MSMEs) are grappling with high regulatory compliance costs, with annual expenses ranging between Rs 13-Rs 17 lakh, according to a latest report by Regulatory Technology (Regtech) solutions firm TeamLease Regtech.
In its report titled 'Decoding Compliance for Manufacturing MSMEs in India' it deciphers the intricate web of compliance obligations, encompassing licences, approvals, registrations, and permissions, that MSMEs must navigate throughout the lifecycle of setting up, operating, and closing an enterprise.
The report highlights that a typical manufacturing MSME with a single unit in one state is subject to over 1,450 compliance obligations annually, cutting across seven categories of law. These include 59 types of inspectors coming at different intervals with different requirements, 48 different registers, and 486 imprisonment clauses, many for procedural lapses.
"The compliance burden is not only intricate but also expensive. The annual cost of meeting these requirements ranges between Rs 13 to Rs 17 lakh, straining enterprises with limited resources and minimal in-house expertise," the report added.
According to the report, Indian labour laws alone account for 66 per cent of all imprisonment-linked compliance, highlighting the excessive criminalisation embedded in the regulatory framework.
The report highlights that this year's Economic Survey which mentioned that the regulatory compliance burden holds back formalisation and labour productivity, limits employment growth, chokes innovation and depresses growth.
One of the biggest hurdles is the ever-evolving and changing ground for implementation. An average of 42 regulatory updates per day for the entire ecosystem, the report stated.
It added that Financial Year (FY) 2024-25 alone saw 9,331 updates across seven categories of law.
These updates come from different ministries, departments and regulatory bodies and impact all levels of enterprise. MSMEs in particular are affected by at least 90 per cent of these updates, given the country has a total of 6,45,22,249 of such enterprises.
Rishi Agrawal, Co-Founder and CEO, TeamLease RegTech "The data reflects an urgent need for reimagining compliance for unshackling India's MSME entrepreneurs. The country's policymakers need to reduce the disproportionately high compliance burden, deeply entrenched hostility, and the menace of inspector raj."
"The country has witnessed the power of DPI (Digital Public Infrastructure) transforming digital payments. We need to add compliance to India's DPI stack," Agrawal added.
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