While wage demands sparked recent labour unrest in the Noida-Greater Noida industrial belt, industry stakeholders say the concerns run deeper. High compliance burdens, legacy bureaucracy, and credit constraints continue to be key structural issues for micro, small, and medium enterprises (MSMEs) in this region, prompting calls for policy action beyond wage revisions. Despite the government’s increasing focus on MSMEs, stakeholders point to a widening gap between policy intent and on-ground execution that continues to constrain the sector.
Stakeholders say there is no denying that the current policy environment is pro-MSME, with a strong belief that the growth of small enterprises will drive overall economic expansion. However, they add that legacy bureaucratic systems and entrenched administrative practices are undermining their growth momentum.
“The intent of the government is not to block MSMEs, but the bureaucracy still wants to run policies in its own way,” says Jitendra Singh Rana, Chairman B2B, Indian Industries Association (IIA), Greater Noida chapter. “Even with favourable policies, officials often exercise discretionary power that creates pressure and uncertainty for businesses,” adds Rana, who is also Director at Prasar Metal Engineering.
Pain points
The inspectorate system and regulatory approvals continue to pose challenges, as businesses often face changes in compliance requirements. Entrepreneurs argue that while they plan investments based on existing rules, sudden additions or modifications in compliance norms increase costs without corresponding support.
Clearances and compliances, particularly from departments such as fire safety and local development authorities, often consume a significant portion of industrial land, especially in small plots, leaving limited space for actual production, says Rakesh Bansal, ex-Chairman, IIA, Greater Noida Chapter and Director at MM Polyvinyls.
For context, the Noida-Greater Noida region of Gautam Buddha Nagar hosts around 15,000-16,000 MSME units across a diverse industrial base. The ecosystem is largely manufacturing-driven, with a strong concentration in electronics and mobile components, electrical equipment, auto components, engineering goods, textiles & garments, leather, and plastics & packaging. There is also a well-developed services sector, including IT/ITeS, BPOs, fintech and edtech start-ups, along with a rapidly growing logistics and warehousing segment. Overall, MSMEs in the region generate 10-15 lakh (estimated) direct jobs, with an additional 5-8 lakh indirect employment across logistics, services, and supply chains. The cluster is also understood to contribute roughly 12-15% to Uttar Pradesh’s Gross State Domestic Product (GSDP).
The leasehold nature of industrial land in Uttar Pradesh has emerged as a structural bottleneck. Development authorities acquire land, develop it, and allot it to industries on long-term leases, typically 90 years, retaining ownership and control. This creates multiple operational constraints. Any change in business activity, ownership structure, or even partial subleasing requires prior approval, often involving lengthy processes and additional costs.
“Even after paying the full cost and annual charges, we don’t have ownership rights. Every small change needs permission,” adds Rana.
Noida’s MSMEs are performing well but remain constrained by weak policy support and high land costs, says Rana. Recent hikes in industrial plot rates by the Noida Authority have worsened the problem, making it difficult for small firms to set up units and pushing many to absorb higher costs or consider relocation.
Rana flags the e-auction system as a key barrier, driving prices to nearly Rs 1 lakh per sq. metre in Noida, with only marginal relief in Greater Noida. The absence of smaller plots, typically under 8,000 sq. ft, further disadvantages MSMEs operating on tight margins. Industry representatives call for scrapping e-auctions in favour of more accessible allotment mechanisms.
Leasing constraints add to the burden, with limited ownership rights, high ground rents, and uncertain renewal terms. Rana urges reforms, including leasehold-to-freehold conversion, fairer lease structures, and greater policy clarity.
Concerns are also mounting among stakeholders over the lack of clarity on lease renewal terms, with industries wary of future costs or potential eviction risks once lease periods expire.
In contrast, several states/UTs, and even Delhi in recent years, have moved towards freehold conversion models, allowing businesses to gain ownership upon payment of a fixed charge.
Single-window systems fall short
While digital initiatives like the ‘Nivesh Mitra’ single-window clearance system were designed to simplify approvals, industry players claim they remain ineffective in practice.
Applications often face technical glitches or procedural gaps, forcing businesses to revert to manual processes. “You can’t fully rely on the portal. Eventually, you have to visit departments and get things done offline,” says Sarabjit Singh, Chairman, IIA, Greater Noida Chapter and Managing Director at Palak Tapes.
This dual system not only delays approvals but also perpetuates rent-seeking behaviour at lower administrative levels, say two Noida-based MSMEs.
Access to finance remains a hurdle
Beyond regulatory issues, MSMEs continue to struggle with access to formal credit, particularly in their early years. Banks typically require a three-year financial track record, making it difficult for new enterprises to secure funding.
“An enterprise needs support when it is starting out. But that’s when no one backs it. Once it stabilises, funding becomes easier,” says Rana, highlighting a persistent structural gap.
The promoters of two Noida-based MSMEs also note that high land costs have driven up project set up expenses, and suggest that the Noida, Greater Noida, and Yamuna Expressway authorities shift their focus from real estate activities to industrial development, prioritising the creation of clusters and dedicated zones.
They point out that with the upcoming international airport, two MSME clusters in the pipeline, and direct connectivity to the Delhi-Mumbai Expressway, Noida’s MSME sector is set for exponential growth over the next decade. They add that the region is emerging as a major logistics hub, which could significantly reduce domestic and international shipping costs, but stress that authorities must step up efforts to fully capitalise on this opportunity.
Case for plug-and-play infrastructure
Industry voices are also pushing for wider adoption of “flatted factory” or plug-and-play industrial infrastructure, ready-built spaces that can be leased and operationalised quickly.
Such models, already prevalent in countries like China, reduce upfront capital requirements and accelerate business setup. While pilot projects have been introduced in parts of the country, stakeholders say scale remains limited despite strong demand.
Execution gap remains the core issue
Overall, stakeholders emphasise that the challenge is less about policy design and more about implementation.
“Policies are good on paper, but execution is the real issue. Awareness is low, and at times, officials do not allow smooth implementation,” industry representatives say.
As India looks to position MSMEs as engines of growth, bridging this last-mile governance gap may prove critical to translating policy ambition into tangible outcomes, they note.
