New Delhi (18.06.2025): India's growth trajectory is being propelled more and more by small businesses and entrepreneurial innovation while the Union Government’s policy has been supporting this change like never before.
One case in point is the exemplary effort made by the Department of Public Enterprises (DPE), Ministry of Finance, in catalysing the significant shift.
The data suggests that the Public Procurement Policy under DPE has made it possible for Central PSUs (CPSEs) to propel the growth of India's start-ups and Micro and Small Enterprises (MSME) ecosystem.
CPSEs purchase go up by 255% in 7 years:
As data reflects India's CPSEs purchased a whopping ₹93,568 crore worth of goods and services from Micro and Small Enterprises (MSEs) in FY 2024–25 — up sharply from ₹26,344 crore in 2017–18, which is a 255% growth in just seven years. This is a proof of the effectiveness of well-designed, targeted public policy.
The origin of this change dates back to the Public Procurement Policy for MSMEs (Order, 2012), which was initially formulated by the Ministry of MSME. The DPE institutionalized and implemented this policy in all CPSEs from 2015-16, realizing the hidden potential of India's small and medium enterprises and start-ups.
Statutory target for annual procurement:
First, 20% of CPSEs annual procurement was to be done from MSMEs. Then it was raised to 25% from April 1, 2019, which became a statutory target and not an aspirational one. This was followed by a sequence of digital and administrative changes: the launch of the MSME Sambandh portal for real-time monitoring, inclusion of procurement performance in CPSE scorecards, and harmonization with Government e-Marketplace (GeM) procedures to enhance access for small players. "The DPE mandate did not merely unlock the door for MSMEs; it established a distinct, policy-supported route for them to emerge as significant suppliers to India's largest public sector undertakings," a DPE senior official noted.
Augmenting employment generation:
This policy driven through procurements has created a significant ripple in the Indian economy. By making CPSEs large customers for early-stage businesses, it has given start-ups the scale, reputation, and market access to expand in a sustainable manner. The enhanced volume of orders has also augmented employment generation to a great extent, especially in Tier 2 and Tier 3 towns, where Micro and Small Enterprises (MSEs), being employment-intensive, are key drivers of local employment. Additionally, the increase in business activity has resulted in increased revenue mobilization, leading to more tax collections, increased reinvestment in business operations, and higher rural incomes, thus contributing to overall economic growth.
MSME & start-up sectors contribute 30% to the GDP:
India's MSME and start-up sectors combined contribute close to 30% to the GDP and employs more than 110 million individuals. DPE's policy, by channelling government expenditure into this sector, not only is democratizing market access but also catalysing inclusive growth.
The success of this programme illustrates the strategic position of public sector enterprises in achieving national development objectives. Through the mobilization of the purchasing power of CPSEs in a focused and responsive policy mandate, the government has successfully transformed procurement into policy-led impact.
As India aspires to become a $5 trillion economy, the DPE's public procurement policy is an important tool — one that narrows the gap between huge institutions and small entrepreneurs at the ground level, and leads the way towards an inclusive, self-reliant economy.
(By Rakesh Ranjan)
