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Renewable energy-based energy conversion technologies have become more relevant due to environmental considerations even though they are intermittent in nature. As a result, the concept of microgrid and microgrid control techniques have been evolved as major areas of power system research. Among different inverter control methods, the droop-based control method is more popular in microgrid systems due to its simplicity and non-requirement of expensive communication systems. The transient performance, power-sharing accuracy and decoupling between real and reactive power are improved by modifying the natural droop control method. In this study, the selected microgrid system consists of two inverters operating in parallel, two interconnecting lines and three loads. A state-space model of the microgrid is created based on the small-signal stability and the transient response is improved by introducing virtual impedance and dynamic droop gains. The different controller parameters are optimised using particle swarm optimisation ensuring stability. Eigenvalue analysis is done to analyse stability. The analysis of the response of the system for various disturbances validates the effectiveness of the proposed controller. The strategy developed ensures improved power-sharing capability with high values of natural droop gains without compromising stability by using optimised dynamic droop gains.