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Title: "Economic Boost: Government Procures 42% of Goods from Micro and Small Enterprises in FY25, Expanding MSME Opportunities"
The Indian government has consistently emphasized the importance of micro, small, and medium enterprises (MSMEs) in driving economic growth and employment. In line with this vision, a significant portion of public procurement is reserved for these smaller enterprises. For the financial year 2025 (FY25), the government reported that 42% of all goods purchased were sourced from micro and small enterprises (MSEs). This substantial procurement underscores the government's commitment to supporting the MSME sector.
The Public Procurement Policy for MSEs, introduced by the MSME Ministry, mandates that a minimum of 25% of the total annual purchases by central ministries, departments, and Central Public Sector Enterprises (CPSEs) must be made from MSEs. Additionally, there are specific targets for procurement from women and SC/ST-owned MSEs, set at 3% and 4% respectively[1][3].
This policy not only supports MSEs financially but also provides them with opportunities to enhance their capacity and technology. In FY25, the overall government procurement from MSEs, although slightly lower in percentage terms compared to FY24, remained above the mandatory target. This reflects the government's commitment to creating a supportive environment for smaller businesses[1].
The petroleum ministry was the top procurer from MSEs in FY25 with purchases worth Rs 27,072 crore, followed by the defence ministry at Rs 10,135 crore, and the power ministry with Rs 9,476 crore[1].
The procurement policy has a significant positive impact on MSEs by providing them with stable revenue streams and encouraging them to invest in technology and machinery. However, the number of MSEs supplying goods to the government decreased to 2.16 lakh in FY25 from 2.58 lakh in FY24[1].
The government is reclassifying MSMEs to include small enterprises with turnovers up to Rs 100 crore under the public procurement policy. This move aims to target investments in plant and machinery instead of just turnover, which could lead to increased participation of small enterprises in government tenders[2][4].
To address liquidity constraints faced by MSEs, the government has implemented various schemes like the Credit Guarantee Scheme for collateral-free loans and measures to ensure timely payment settlements through Micro & Small Enterprises Facilitation Councils (MSEFCs)[3].
In FY25, procurement from SC/ST-owned MSEs increased to Rs 2,727 crore, representing 1.50% of total MSE purchases. Similarly, procurement from women-owned MSEs rose to Rs 4,463 crore, accounting for 2.45% of the total[1].
The policy provides specific targets to ensure equitable opportunities for these groups, helping to diversify the supplier base and promote social equity within the MSME sector.
The government's continued emphasis on procurement from micro and small enterprises is a strategic move to foster economic growth and inclusivity. By ensuring a significant portion of public procurement is sourced from MSEs, the government supports not only these businesses but also contributes to broader economic development. The evolution of the MSME definition and policy adjustments are expected to further enhance the participation of small enterprises in the public procurement process, leveraging technology and machinery investments as key drivers for growth.
Keyword Highlights: Public Procurement Policy, Micro and Small Enterprises (MSEs), MSME Sector, Government Procurement, Economic Growth, MSME Opportunities, Central Public Sector Enterprises (CPSEs), SC/ST and Women Entrepreneurs.
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