“Uttar Pradesh’s MSME sector, employing over 14 million, is set for growth with new incentives under the 2022 Promotion Policy and ODOP scheme. Capital subsidies, interest relief, and infrastructure support aim to boost small businesses, especially in rural areas, fostering inclusive growth and economic transformation.”
Uttar Pradesh Bolsters MSME Sector with Robust Incentives
Uttar Pradesh, home to over 90 lakh micro, small, and medium enterprises (MSMEs), is leveraging its position as India’s MSME hub to drive economic growth and job creation. The state accounts for 14% of India’s 6.3 crore MSME units, employing over 14 million people, particularly in rural and semi-urban areas. These enterprises contribute significantly to the state’s economy, with a focus on traditional industries like textiles, handicrafts, and agro-based sectors. The state government’s strategic initiatives, including the Uttar Pradesh Micro, Small & Medium Enterprises Promotion Policy 2022 and the One District One Product (ODOP) scheme, are pivotal in fostering this growth.
The 2022 MSME Promotion Policy offers a range of financial incentives tailored to support small businesses, especially in underdeveloped regions like Bundelkhand and Purvanchal. Capital subsidies range from 10% to 25%, capped at ₹4 crore per unit, with an additional 2% for SC/ST and women entrepreneurs. Micro-units can avail a 50% interest subsidy for five years, up to ₹25 lakh, while SC/ST and women-led units are eligible for a 60% subsidy. Industrial parks with a minimum area of 10 acres qualify for a 50% infrastructure interest subsidy, capped at ₹2 crore annually for seven years. Additionally, MSMEs benefit from stamp duty exemptions—100% in Purvanchal and Bundelkhand, 75% in Madhyanchal and Paschimanchal, and 50% in Gautam Budh Nagar and Ghaziabad. Women entrepreneurs receive a full stamp duty exemption statewide.
The ODOP scheme, a flagship initiative, promotes one unique product from each of Uttar Pradesh’s 75 districts, such as chikankari from Lucknow, zari-zardozi from Bareilly, and kalanamak rice from Siddharthnagar. This program has revitalized traditional crafts, created product-specific industrial hubs, and provided livelihoods for millions, particularly rural artisans. By offering marketing support, common facility centers, and export-linked incentives, ODOP enhances global competitiveness. The state has also introduced the Uttar Pradesh Chief Minister Youth Self Employment Scheme 2020, providing loans up to ₹25 lakh for manufacturing and ₹10 lakh for services, with a 25% margin money subsidy.
Recent data highlights the sector’s impact. MSMEs in Uttar Pradesh contribute 33.4% to India’s manufacturing output and account for 29% of the nation’s artisans. The state’s handloom industry produces 15% of India’s fabric output, aligning with the Make in India initiative. In 2024, Chief Minister Yogi Adityanath emphasized, “Our goal is to ensure every MSME unit in UP becomes globally competitive, digitally empowered, and financially independent.” To achieve this, the state is investing in digital infrastructure and simplifying regulatory processes. A digital platform offers end-to-end support, including business ideas, market trends, and financing options in Hindi and English, aiding rural entrepreneurs.
Export promotion is another focus area. MSME exports from Uttar Pradesh surged from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25, with the number of exporting MSMEs rising from 52,849 to 1,73,350. The state government supports this growth through export facilitation centers and incentives for obtaining patents and Geographical Indication (GI) tags, with reimbursements up to ₹10 lakh. Financial assistance for quality certifications like ZED and GMP (up to ₹5 lakh) and ERP/ICT solutions (up to ₹5 lakh) further strengthens MSME competitiveness.
Despite these advancements, challenges persist. Limited access to raw materials at competitive prices, outdated skills, and exploitation by middlemen hinder growth. The state is addressing these through skill training under the Vishwakarma and Tool Room Centers, offering grants from ₹10,000 to ₹1 lakh for artisans. Additionally, the Union Budget 2025-26 has bolstered MSME support with a credit guarantee cover increase from ₹5 crore to ₹10 crore, unlocking ₹1.5 lakh crore in credit over five years. MSME credit cards and a ₹5 lakh credit facility for micro-enterprises registered on the Udyam portal are also being introduced.
Uttar Pradesh’s MSME ecosystem is poised for exponential growth, driven by a combination of state and central government initiatives. With a focus on inclusive development, the state is targeting a $1 trillion economy, with MSMEs as a cornerstone. By fostering entrepreneurship, enhancing digital access, and promoting exports, Uttar Pradesh is transforming into one of India’s most MSME-friendly states.
Disclaimer: This article is based on information sourced from government websites, including invest.up.gov.in, msme.gov.in, and recent reports from Entrepreneur, SMEStreet, and Drishti IAS, as well as Union Budget 2025-26 announcements. While every effort has been made to ensure accuracy, readers are advised to verify details with official sources before making business decisions.