Abstract: The significant role of government policies and initiatives in accelerating digital payment adoption among Micro, Small, and Medium Enterprises (MSMEs) in India transformative journey of India's MSME sector towards digital payment integration, driven by government initiatives under the Digital India program, such as the DIGIDHAN Mission and the Unified Payments Interface (UPI) is the key areas which this paper examines. The surge in digital payment transactions and the pivotal role of platforms like UPI in this growth are underscored. Additionally, the study discusses the Reserve Bank of India's Digital Payment Index, indicating a deepening reliance on digital transactions across India, supported by increased internet and mobile phone penetration and government initiatives.

The research also explores challenges, including digital literacy and access, security concerns, and the barriers to digital financial inclusion. Government policies and initiatives aimed at enhancing market access, technological empowerment, and financial inclusion for MSMEs, such as the Procurement and Marketing Support Scheme and the MSME Champions Scheme, are critically analyzed. 

Keywords: Digital Payment Adoption, MSMEs, Government Policy, Digital India, Financial Inclusion.