Delayed payments have long been one of the most critical challenges for Indian MSMEs, particularly micro enterprises, and I have highlighted this in my earlier posts. We often talk about ease of doing business, digital transformation,  and the promise of a growing economy, but on the ground things are not conducive for MSMEs to operate or scale. A delayed payment is a roadblock that can disrupt production, halt procurement, affect logistics, and even delay salaries. In many cases, businesses are even forced to borrow at high interest rates just to stay afloat.

I have come across media reports indicating that delayed payments have come down to Rs 7.34 lakh crore as of March 2024 as compared to Rs. 8.27 lakh crore in the previous year and Rs. 10.27 lakh crore in 2022. While this is a positive trend, the reality is that over 4.6% of India’s GVA (Gross Value Added) is locked-up and unavailable to the enterprises that need it the most.

If this locked-up capital were released, MSMEs could use it for technology adoption, expansion, infrastructure development, upskilling the workforce and overall business growth. The issue is not only impacting the individual business owners but also affecting the broader economic ecosystem of the country. We all are aware that MSMEs already struggle with credit crunch and are dependent on banks, NBFCs, and private lenders to maintain cash flow, and payment delays further severely hinder their ability to contribute to India’s economic progress.

Large enterprises often misuse their bargaining power and small businesses, for the fear of losing orders, are compelled to accept delayed payments. Unfortunately, this pattern has become a new normal. In my opinion, fixing this issue requires much more than policy reforms. Buyers must understand that timely payments are their responsibility. At the same time, we should have stricter contractual enforcement and faster dispute resolution to ensure compliance.

I also believe technology can play a larger role. Automated reminders, cash-flow based digital credit, and platforms that track payment cycles can make delays harder to hide and easier to address.

Timely payments are the need of the hour for a stronger and more resilient MSME sector.