The Comptroller and Auditor General of India (CAG) has launched an integrated audit across 32 states and Union Territories to assess the ease of doing business for the micro, small and medium enterprise (MSME) sector. The move marks a shift from vertical, deep-dive audits to a horizontal, pan-India review. The consolidated report is expected to be presented in the 2026 winter session of Parliament.

Additional Deputy Comptroller and Auditor General Pravir Pandey described the exercise as a “citizen-centric” audit designed for “people who benefit from MSMEs, who use MSME services, and the MSME industry itself”. The initiative aligns with flagship programmes such as Make in India, Atmanirbhar Bharat and the MSME (Udyam) Registration portal.

The audit will examine whether on-ground reforms are delivering efficient, timely and transparent services to small businesses in line with the Viksit Bharat 2047 vision and the Business Reforms Action Plan 2024. Key focus areas include decriminalising minor business offences, easing approval requirements, digitising processes, improving financial literacy, enhancing credit access and ensuring timely payments.

Pandey said the audit process has involved discussions with the MSME Secretary, Additional Secretary and Development Commissioner, as well as chambers of commerce and state-level industry, labour and power departments. Engagements have also taken place with urban local bodies and district-level MSME coordination committees. The report will evaluate core themes such as R&D support, labour law compliance, financial linkages and the impact of climate-related disruptions on MSMEs. A pilot in West Bengal has served as a model for the nationwide audit.

CAG has also directed the Union and all state governments to adopt a harmonised, common “object head” classification for expenditures at a disaggregated level by 2027–28. Deputy Comptroller and Auditor General Jayant Sinha said the framework adapts the finance ministry’s format and adds new heads to meet state requirements, including social security expenditure.

The unification aims to eliminate discrepancies in Budget heads across states, enabling greater uniformity, transparency and comparability in public finances.

Separately, CAG will establish a world-class centre of excellence in Hyderabad to advance accounting and auditing standards. Expected to soft-launch later this month, the centre will focus on innovation, research and professional development. It will host a comprehensive data hub, aggregating accounting data from more than 300 central and state public sector undertakings (PSUs), over 1,300 autonomous bodies and major urban local bodies.

Deputy Comptroller and Auditor General Anand Mohan Bajaj noted a rising emphasis on auditing environmental, social and governance (ESG) criteria for top-listed PSUs, in line with global sustainability trends. A CAG report on ESG is expected within the next four to five months.