The Comptroller and Auditor General of India (CAG) has launched a landmark Pan-India Horizontal Audit focused on ease of doing business for Micro, Small, and Medium Enterprises (MSMEs). This audit represents a significant shift from the traditional vertical audit approach — which examines a single ministry or department — to a horizontal audit model that cuts across multiple departments and government levels simultaneously.
The audit spans all 32 states and Union Territories and is designed to evaluate how effectively government systems support the MSME sector, which forms the backbone of India's economy contributing over 31% to GDP and supporting livelihoods for nearly 32.8 crore people. Three major thematic areas form the audit's core: Research and Development (R&D) ecosystem support for MSMEs, compliance with labour laws and associated ease of operations, and climate-related regulatory challenges facing small businesses.
The horizontal audit methodology represents a citizen-centric approach, meaning it evaluates government performance from the perspective of the enterprise-owner or citizen rather than from a departmental compliance lens. This approach allows auditors to identify systemic gaps, duplications, and bottlenecks that span across departments — issues that would remain invisible under siloed vertical audits.
The final audit report is expected to be tabled during the Winter Session of Parliament in 2026. Once published, it will provide a comprehensive, evidence-based assessment of India's regulatory environment for MSMEs and is likely to inform significant policy and legislative reforms. CAG's move toward performance and citizen-centric audits marks a new era in public financial management accountability in India.