MSME Prevention of Delayed Payment

Delayed Report 1.0 Supply Chain and Economy

Despite its importance in the economy, the MSME sector continues to face considerable challenges that prevent improvements in both its share in the Gross Value Added and the lives of people it employs.

Globally, the MSME sector comprises a very large number of small businesses that are marked by informality and low productivity. The World Bank has highlighted how access to financing remains one of the most significant constraints to the survival, growth and productivity of MSMEs for emerging economies. 

Cash flow is the lifeblood of any business. Positive cash flow allows MSMEs to invest in more production cycles, meet statutory payments on time, and even access credit. To manage cash flow mismatches, MSMEs borrow from financial institutions or local money lenders, a cost which ultimately prices up the of goods sold or services provided.

Wicked Issue

Payment delays to MSME suppliers remains an endemic and intractable problem in India. MSMEs contribute 33.5% of India’s annual GVA [MSME Annual Report 2020-21, Ministry of Micro, Small, and Medium Enterprises], and the smallest of them – micro enterprises – employ 97% of all people employed by MSMEs, as well as an estimated 23% of India’s total workforce*. Payments when delayed to MSME suppliers by their larger buyers hinders not just the viability and growth of MSMEs, but overall competitiveness of the Indian economy. An estimated INR 10.7 Lakh Crore i.e. 5.9% of the gross value added (GVA) of Indian businesses is locked up annually as delayed payments from buyers to MSME suppliers. 

Fundamentally, payments are delayed because of a power asymmetry between smaller suppliers and large buyers. By and large, the structure of supply chains mirrors the structure of biological food chains: lots of small suppliers supply to a smaller number of large buyers, who aggregate, assemble, and sell value-added goods and services to the end customer. This is even more true in an Indian context where many formal industries are dominated by a few established players, particularly in areas like healthcare, high-end manufacturing, and of course, the public sector (with Maharatna and Navratna PSUs often having near-monopolies in raw materials and industrial commodities). 

The great power (through size or frequency of orders) wielded by larger players in a supply chain comes with the responsibility of paying suppliers on time and negotiating payment terms that are reasonable and fair for the smaller parties. By withholding payments (or trade payables) beyond the agreed credit periods, buyers essentially get access to free cash to finance their own working capital cycles, at the cost of their deprived. If this happens repeatedly and across industries, then it indicates that delaying payments is being deployed widely as a tactic by larger businesses to accumulate gains that should be distributed back to those who provide value to them.

Delayed Report Pic 3.1

For most MSMEs, delayed payments have become normalized and an attribute of India’s business culture. MSMEs capable of differentiating themselves to win the loyalty of buyers and incentivize good behavior from them do so, but often at the cost of their own profitability. These businesses include the probability of receiving delayed payments into their way of doing business, as an implicit and concealed cost of operations. Buyers, on their part, claim that delayed payments occur for reasons out of their control, although this claim must be held to a higher burden of proof and standards of accountability.

Beyond hard numbers, the persistence of delayed payments reduces trust in the Indian economy. At a systems level, the balance of delinquency against diligence impacts the level of certainty and trust, both essential components of a well-functioning economy and society. Simply put, the absence of fear of being cheated along with predictability of outcomes help businesses make better, longer term, and more strategic decisions for their future. High-trust societies and systems have repeatedly proven to be better at achieving collective goals than low-trust counterparts.

If India is to become a five or even ten trillion-dollar economy, it must ensure that its economic actors are reliable and trusted, and timely payments are made to MSMEs by buyers. This can go a long way towards reducing the transaction costs of conducting business in India and encouraging greater job creation by enabling a culture of considered risk-taking. At the moment, our economy seems a far way off from this reality.

Delayed Payment Report 2.0 Table_3.1


GAME was the first to highlight the importance of Delayed Payments as a wicked problem plaguing the MSME sector and we brought out our first report on this issue in 2022. And taking the discussion a step further GAME has also launched the Delayed Payments 2.0 report in March 2023 which is the first ever solution focused study which suggests plausible solutions for this problem with three central pillars – Government and Policy Makers, Finance Enablers and Financiers, and Large Enterprises (including PSUs) for resolving Indian MSME’s financial crisis, as well as focus on creating an additional 10 crore jobs by 2030.

Delayed Payment Report 1.0

Unlocking the full potential of India's MSMEs through prompt payments

Delayed Payment Report 2.0

Imagining solution to unlock working capital for MSMEs

What We Do


Based on the curriculum, we curate custom programs and products for varied educational organizations, learning institutes and other student-oriented platforms.


Engaging with content and implementation partners to ensure that EMC initiatives can reach millions of students.


Our esteemed and respected taskforce comprises of people whose work spans across the grassroot to policy

Impact Evaluation

We help our partners in building standardized frameworks for assessing and analyzing the impact of the ongoing/completed programs to be used as benchmarks for scaling future programs.

Our Partners

GAME’s Landscape Study on Entrepreneurship Mindset Curriculum

Get insights into ‘Entrepreneurship Education’ and why it is the need of the hour.

If you share the same vision, join us in our mission to help build the entrepreneurial ecosystem for the future leaders

write to us at [email protected]