From Equality to Economic Growth: The Constitution’s Enduring Support for Small Businesses 

26 November marks India’s Constitution Day or Samvidhan Diwas, as the nation adopted the Indian Constitution in 1949 that came into effect on January 26, 1950. Drafted over 11 sessions, the Indian Constitution was the world’s longest written constitution that consisted of 395 Articles and 8 Schedules for the country’s citizens and also the country’s micro, small, medium and large enterprises. The day is a tribute to the architects of the Constitution, that included stalwarts like Jawaharlal Nehru, Sardar Vallabhai Patel, Dr Rajendra Prasad and others under the leadership of Dr. B.R. Ambedkar; who laid the foundational principles that continue to guide the nation since 1950.

This foundation has been particularly beneficial for their growth and also helped to introduce new schemes, initiatives and regulations; thereby fueling their overall upliftment. For example, Pandit Jawaharlal Nehru was pivotal in supporting MSMEs through his vision of self-reliance and inclusive economic growth. His emphasis on promoting cottage and village industries and policies like the Five-Year Plans, the Industrial Policy Resolutions of 1948 and 1956 provided incentives and protections for small-scale enterprises. In addition, the Khadi and Village Industries Commission (KVIC) was established in 1956, prioritizing vocational training and technical education to create a skilled workforce.

This legacy lives on and the Constitution continues to have many initiatives that make the business environment conducive for MSMEs. Some of these include:

1. Right to Equality (Article 14): Enables small business owners to compete fairly in the market without discrimination. 

2. Right to Practice Any Trade or Profession (Article 19 (1)(g)): Guarantees the freedom to start and run a business without unnecessary restrictions. It protects the rights of individuals to explore diverse business opportunities. 

3. Equitable Resource Distribution (Article 39): Part of the Directive Principles of State Policy (DPSP), this article advocates for fair resource allocation to promote small-scale industries. It ensures MSMEs have access to the resources they need to thrive. 

4. Promotion of Cottage Industries (Article 43): Encourages the growth of cottage industries, particularly in rural areas. By supporting these enterprises, the Constitution contributes to job creation and economic development in underrepresented regions. 

While the above steps have been implemented to ensure small enterprises have the opportunity to thrive in a competitive market, the Constitution’s principles of equality, opportunity, and economic inclusion have inspired several initiatives to support the growth of MSMEs. Listed below are some of these initiatives introduced in the past two decades that address the challenges faced by small businesses such as access to credit, delayed payments, lack of formal recognition, among others: 

1. Prime Minister’s Employment Generation Programme (PMEGP) 
   The program was launched in 2008 to promote self-employment, especially in rural and semi-urban areas, where job opportunities were limited, and migration to cities was on the rise. It sought to encourage individuals to start their own businesses, reduce unemployment, and foster economic growth in underserved regions. This resulted in over 7 lakh micro-enterprises being established under PMEGP, generating significant employment opportunities and contributing to local economies.  

2. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) 
   Access to credit has been a long-standing challenge for MSMEs, particularly for those without collateral or traditional security. CGTMSE was thus introduced in 2000 to enable such businesses to obtain loans without the need for collateral, ensuring that lack of assets does not hinder entrepreneurship. 

3. MUDRA Loans 
   Many small businesses, especially at the grassroots level, struggled to access formal credit due to high interest rates and lack of financial infrastructure. MUDRA loans under the Pradhan Mantri Mudra Yojana (PMMY) were introduced in 2015 to bridge this gap and provide affordable credit to small and micro enterprises.
   
   Since its inception, MUDRA loans have sanctioned over ₹15.52 lakh crore to approximately 29.55 crore beneficiaries, fostering entrepreneurship and strengthening the rural and semi-urban economy. This initiative has empowered women entrepreneurs, who account for a significant portion of MUDRA loan recipients.

4. MSME Development Act, 2006 
   The MSME sector has often faced challenges like delayed payments, lack of formal recognition, and unfair practices. MSME Development Act, 2006 was introduced to address these issues by ensuring timely payments to small businesses, providing grievance redressal mechanisms, and formally defining MSMEs to create a structured framework for their growth.
   
   The Act has improved cash flow for MSMEs by mandating timely payments and offering legal recourse for disputes. It has also encouraged fair trade practices, protecting small businesses from exploitation and enabling them to focus on growth and innovation. 
   

5. Fiscal Incentives for Industrial Promotion 
   These incentives encourage innovation and expansion within the MSME sector. By supporting industrial growth, they help small businesses scale operations and contribute more effectively to the economy.  

These initiatives have laid a solid foundation for MSMEs in the country. However, the Constitution’s role hasn’t ended at just laying the groundwork but extends to adaptability and relevance to modern challenges. By continuing to align reforms with constitutional principles, India can ensure that its small businesses not only survive but thrive, driving innovation, employment, and sustainable growth for generations to come.  

Key Reforms Addressing the Evolving Needs of MSMEs  

From promoting financial inclusion to encouraging innovation, the Constitution has constantly encouraged schemes and reforms that address the evolving needs of the MSME sector. 

1. Udyam Registration System 
   Introduced in July 2020, Udyam provides small businesses with formal recognition and easy access to government benefits, saving time and reducing hassle. It simplifies the process of registering MSMEs by offering a fully online and paperless platform. As of July 2024, there are 4.77 cr of MSMEs register on the Udhyam portal 

2. Insolvency and Bankruptcy Code (IBC) Framework
   The MSME-specific IBC framework provides quick resolutions for businesses facing financial distress. This ensures struggling enterprises can either continue operating or close efficiently, avoiding prolonged legal battles and financial losses. 

3. GST Reforms 
   Under the GST regime, the Composition Scheme allows MSMEs to pay lower taxes and file simplified returns, easing compliance. E-invoicing and other digital solutions have made tax processes more accessible, saving time and effort for small businesses. 

4. CHAMPIONS Portal
   The CHAMPIONS Portal acts as a one-stop solution for MSME grievance redressal and business support. It offers mentorship, addresses operational challenges, and facilitates growth through technology-driven solutions, creating an inclusive ecosystem for small enterprises. 

The above-mentioned combination of the reforms and initiatives have shown immense success towards MSMEs, ensuring that the sector is now contributing nearly 30% to the nation’s GDP. Even visionary leaders such as the present Chief Justice of India Mr. Sanjiv Khanna commended India’s progress as a democracy and global leader and credited the Constitution for this change in his speech on Nov 26. 

As we continue to focus on India becoming a developed nation by 2047, staying anchored in these constitutional values will not only ensure the resilience of MSMEs but further solidify their role as catalysts for sustainable development and equitable prosperity.