Zero Defect Zero Effect (ZED) Certification Scheme (2025)

Policy Update
Atharva Salunke

Background:

The Zero Defect Zero Effect (ZED) movement was envisaged after Prime Minister Narendra Modi invited the country to encourage production with “zero defects” in goods and “zero effect” on the environment while delivering India’s 68th Independence Day speech. Originating in the vision of Make in India, the program focuses on developing India as a global manufacturing center through inducing industries, specifically Micro, Small and Medium Enterprises (MSMEs), towards sustainable, high-quality, and globally competitive production practices. Identifying MSME sector as a driving force for economic growth, employment, and innovation, the government was desirous of making them globally competitive with better quality standards, efficiency, and environmental stewardship.

The program is administered by the Quality Council of India (QCI) under the Ministry of MSME as a holistic framework that evaluates, certifies, and handholds companies to upgrade their systems and processes. It supports government initiatives for Ease of Doing Business and skill development so that Indian industries are able to compete with international standards. Through facilitation of zero-defect manufacturing and zero harm to the environment, ZED will make Indian products world-renowned and support the vision of Atmanirbhar Bharat.

Functioning:

The MSME Sustainable (Zero Defect Zero Effect – ZED) Certification Scheme functions on an expansive and multi-component system geared towards instilling quality, efficiency, and green responsibility within Micro, Small, and Medium Enterprises. It starts with Industry Awareness Programmes and Workshops at the national level in both online and offline formats. These are intended to inform MSMEs regarding the significance and advantages of ZED certification. The programmes are structured with assistance from influential stakeholders like Industry Associations, Implementing Agencies, MSME-District Industries Centres (DICs), MSME-DIs, Large Enterprises/OEMs, and the Bureau of Energy Efficiency (BEE).

Secondly, Training Programmes are carried out for stakeholders such as MSME Officers, Assessors, and Consultants for the effective implementation. These training programmes are aided by the partner institutions such as the Quality Council of India (QCI), Bureau of Indian Standards (BIS), and National Productivity Council (NPC).

Under the Assessment and Certification section, MSMEs are assessed through desktop verification, remote evaluation, or onsite evaluation, as applicable. They receive certification levels of Bronze, Silver, Gold, Diamond, and Platinum based on their performance.

Through Handholding Support, MSMEs receive guidance for improving performance, achieving higher certification levels, and upgrading technologies to adopt zero effect solutions, pollution control, and cleaner production processes.

The scheme also provides Financial Assistance and Incentives, including graded subsidies, 80%, 60%, and 50% for Micro, Small, and Medium enterprises respectively. Additional subsidies include 10% for Women/SC/ST-owned MSMEs or those in NER, Himalayan, LWE, Island, and Aspirational Districts, and 5% for units under SFURTI or MSE-CDP.

The ZED Portal enables a fully digital, single-window process for registration, learning, certification, and monitoring. Moreover, MSME KAWACH (Knowledge Acquisition through WASH) supports preparedness against COVID-19 risks through WASH Standard certification. To ensure visibility, nationwide Public Relations, Advertising, and Brand Promotion Campaigns are conducted to popularize ZED and encourage sustainable growth within India’s MSME ecosystem.

Performance:

Since the inception of the new scheme dated April 28, 2022, the Zero Defect Zero Effect (ZED) Certification Scheme has recorded outstanding growth across the country. Up to March 28, 2025, the cumulative tally of certifications issued stood at 2,83,515 all over the country. Certifications grew substantially from 3,160 in 2022-23 to 1,76,317 in 2023-24, and 1,04,038 in 2024-25, reflecting sturdy momentum and widespread uptake.

Some of the leading states that performed well include Gujarat (56,850), Karnataka (47,239), Uttar Pradesh (27,042), Bihar (20,804), and Maharashtra (19,051). The active participation of Punjab, Haryana, Tamil Nadu, and Rajasthan also evidences the increasing focus of the MSME sector on quality and sustainability. This performance also indicates the effectiveness of the ZED initiative in promoting awareness, certification, and competitiveness among MSMEs and aligning with India’s overall vision for sustainable industrial growth and Atmanirbhar Bharat.

Table 1: State-wise Performance of ZED Certifications (as on 28th March 2025):

Impact:

The scheme has positively impacted India’s MSME industry by promoting a quality culture, sustainability, and competitiveness. As of March 2025, the scheme has issued more than 2.83 lakh certifications in the country. The scheme has been able to promote MSMEs implementing global best manufacturing practices in an environmentally friendly manner. Leading states are Gujarat, Karnataka, Uttar Pradesh, Bihar, and Maharashtra, demonstrating increasing regional involvement and awareness.

The programme has increased production efficiency, minimized wastage, and boosted environmental compliance, thus improving MSMEs’ export competitiveness. With the provision of financial incentives, capacity-building training sessions, and support for technology upgradation, ZED has enabled smaller firms to gear up for greater operational excellence. In addition, the programme has helped in the generation of employment, enhancing workplace safety, and conservation of the environment. With the encouragement of sustainable production, the ZED Scheme is now a pillar of India’s vision for Atmanirbhar Bharat and an engine for inclusive industrial growth.

Emerging Issues:

Though the Zero Defect Zero Effect (ZED) Scheme has been well successful in encouraging quality and sustainability across MSMEs, some emerging issues still remain. The major issue is that the scheme absolutely depends on a digital platform for application, training, evaluation, and certification. This digital-first strategy, though effective, could affect organizations and enterprises in remote or rural regions with poor internet connectivity or less digital literacy.

These MSMEs will be challenged in accessing online modules, applying, or engaging with e-learning and assessment procedures. Such a digital divide can be addressed by localized facilitation, offline centres for facilitation, or hybrid awareness programmes to ensure that all the MSMEs, regardless of location, gain equally from the ZED initiative and support India’s sustainable industrial development.

Way Forward:

It is suggested that the Zero Defect Zero Effect (ZED) Scheme also have an offline or hybrid process alongside its online framework so as to provide inclusivity and accessibility for all MSMEs. Numerous small businesses, especially in rural and far-flung areas, might struggle with limited access to the internet or digital literacy. Creating offline facilitation centers using District Industries Centres (DICs), MSME-DIs, or Industry Associations can assist in filling this gap by offering on-the-ground facilitation for registration, training, and certification.

References:

1. Government of India, Ministry of Micro, Small and Medium Enterprises. (2025, April 3). [Unstarred Question No. 5380, Lok Sabha]. https://sansad.in/getFile/loksabhaquestions/annex/184/AU5380_VcAJ5f.pdf?source=pqals
2. Government of India, Ministry of Micro, Small and Medium Enterprises. (2022). Operational guidelines for Zero Defect Zero Effect (ZED) Scheme 2022. https://dcmsme.gov.in/schemes/clcs-tus/Operational_Guidelines_ZED.pdf
3. Government of India, Ministry of Micro, Small and Medium Enterprises. (n.d.). Zero Defect Zero Effect (ZED) scheme. https://zed.msme.gov.in/
4. Press Information Bureau. (2022, April 28). Shri Narayan Rane launches MSME Sustainable (ZED) Certification Scheme, interacts with Principal Secretaries of States/UTs on synergizing efforts, developing focused approach to prepare MSME ecosystem for the future. PIB Delhi. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1821003
5. Press Information Bureau. (2024, July 22). Technological transformation of MSMEs. PIB Delhi. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2035077
6. Press Information Bureau. (2021, November 29). Zero Defect Zero Effect scheme. PIB Delhi. https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=1776100

About the Contributor:

Atharva Salunke is a Policy Research Associate at NITI TANTRA and a Research Intern at IMPRI. He has recently graduated with a Bachelor’s degree in Political Science from Sir Parashurambhau College, Pune.

Acknowledgement: The author extends his sincere gratitude to the IMPRI team and Ms. Aasthaba Jadeja for her invaluable guidance throughout the process.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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