Barriers to Greening the Indian <scp>MSMEs</scp> Sector: A Path Toward Sustainable Industrial Transformation

ABSTRACT This study identifies and ranks barriers that prevent India's Micro, Small, and Medium Enterprises (MSMEs) from adopting green and sustainable industrial transformation—an essential step for achieving the country's environmental goals. Most of the existing studies examine the promotion of MSME growth along with environmental sustainability, but often in a limited and fragmented way. The lack of comprehensive analysis of the diverse barriers is more evident in the context of the Indian MSMEs, especially related to regulatory challenges. This study seeks to address this gap by conducting a systematic literature review (SLR) to extract a comprehensive list of barriers spanning from 2001 to 2024. Subsequently, Fuzzy AHP was applied to rank and prioritize these barriers. Finally, a sensitivity analysis was used to ensure the reliability of the fuzzy system. Since most Indian MSMEs operate informally, this paper adopted a more structured classification of government policy and regulations to comprehend the complexities of regulatory constraints encountered by Indian MSMEs. The results indicate that among the four identified categories, organizational barriers were the most significant, followed by government policy and regulations barriers, technological barriers, and financial barriers. The findings of the sensitivity analysis revealed the interactions among the identified barriers and advocate the importance of handling these challenges in a coordinated manner. Further, the study found that the non‐mandatory nature of eco‐friendly measures allows Indian MSMEs to prioritize profit over environmental sustainability, contradicting the common perception that they neglect environmental responsibilities merely to sustain their operations. For effective policymaking, the study emphasizes the need for both a unified approach to eliminating existing barriers and the implementation of robust regulatory measures to promote green and sustainable transformation in India's MSME sector.