Uttar Pradesh’s MSME sector, employing over 14 million, gets a boost with new incentives under the 2022 Promotion Policy. Capital subsidies, interest relief, and stamp duty exemptions aim to drive growth, especially in rural areas. The One District One Product scheme fuels job creation, targeting a $1 trillion economy.
Uttar Pradesh Powers MSME Growth with Job-Centric Incentives
Uttar Pradesh, home to over 90 lakh Micro, Small, and Medium Enterprises (MSMEs), is leveraging its vast MSME base to drive economic growth and job creation. The state accounts for 14% of India’s 6.3 crore MSMEs, employing more than 14 million people, particularly in rural and semi-urban areas. The Uttar Pradesh Micro, Small & Medium Enterprises Promotion Policy 2022, alongside schemes like One District One Product (ODOP), is fueling this transformation by offering financial incentives and infrastructure support to small businesses.
The 2022 policy provides capital subsidies ranging from 10% to 25%, capped at ₹4 crore per unit, with higher benefits for enterprises in backward regions like Bundelkhand and Purvanchal. SC/ST and women entrepreneurs receive an additional 2% subsidy. Micro units are eligible for a 50% interest subsidy for five years, with SC/ST and women-led units getting up to 60%, capped at ₹25 lakh per unit. Industrial parks with a minimum area of 10 acres qualify for a 50% infrastructure interest subsidy, up to ₹2 crore annually for seven years. Stamp duty exemptions are also significant, with 100% relief in Purvanchal and Bundelkhand, 75% in Madhyanchal and Paschimanchal, and 100% for women entrepreneurs statewide.
The ODOP scheme, a flagship initiative, promotes one unique product from each of Uttar Pradesh’s 75 districts, such as chikankari from Lucknow and kalanamak rice from Siddharthnagar. This program has created product-specific industrial hubs, preserving cultural heritage while generating employment for millions. The scheme supports artisans and traditional crafts, boosting exports and reducing regional disparities. MSMEs in the state contribute to 45% of Uttar Pradesh’s exports, with sectors like textiles, handicrafts, and leather playing a pivotal role.
Recent budget announcements further strengthen the MSME ecosystem. The Union Budget 2024 allocated funds for infrastructure development, including improved transportation and logistics, which reduce costs for small businesses. The state government is also investing in digital infrastructure to enhance market access, enabling MSMEs to compete globally. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) facilitates easier access to collateral-free loans, critical for rural enterprises.
The Mukhyamantri Yuva Udyami Vikas Abhiyan, with a ₹1,000 crore allocation for 2024–25, targets youth entrepreneurship by offering interest-free loans up to ₹5 lakh. This initiative links young people with training and resources to start MSME ventures, fostering job creation. The state’s focus on skill development and innovation, including Centers of Excellence in AI, blockchain, and other emerging technologies, aligns with the broader vision of making Uttar Pradesh a $1 trillion economy.
Despite these advancements, challenges persist. Limited access to raw materials at competitive prices, outdated skills, and reliance on middlemen hinder growth. The shift to power looms has impacted traditional weaving, and high electricity costs—around ₹8 per unit compared to ₹5 in states like Haryana—pose additional burdens. Addressing these issues is critical to sustaining MSME expansion and ensuring economic inclusivity.
The footwear industry, a key MSME segment, is set to receive a dedicated policy focusing on hubs like Agra and Kanpur. This policy will offer capital subsidies up to ₹80 crore and support ancillary industries, potentially creating jobs for 22 lakh people. Uttar Pradesh aims to become a global leader in footwear exports, following Tamil Nadu’s model.
With a projected growth of India’s MSME sector to $1 trillion by 2028, Uttar Pradesh’s strategic policies position it as a leader in this space. The state’s 29% share of India’s artisans and 15% of national fabric output through handlooms underscore its potential. By fostering entrepreneurship and reducing financial barriers, Uttar Pradesh is paving the way for inclusive growth and large-scale employment.
Disclaimer: This article is based on recent reports, government policies, and news sources, including invest.up.gov.in, msme.gov.in, and entrepreneur.com. Information is accurate as of August 2025 but subject to change. Readers are advised to verify details with official government portals.