As of February 28, 2025, 35,567 micro, small, and medium enterprises (MSMEs) in India have closed down. This number has nearly doubled from the 19,828 closures reported in the financial year 2024, according to a written response from Shobha Karandlaje, Minister of State for MSMEs.
Year-On-Year Comparison: Worrying Upswing
Registered on the Udyam portal (launched July 1, 2020), the current figure forms 47.4% of the total 75,082 MSMEs closed since the portal began. The year-on-year jump highlights a troubling trend:
- FY21: 175 closures
- FY22: 6,222
- FY23: 13,290
- FY24: 19,828
- FY25 (till Feb 28): 35,567
Hardest Hit States
- Maharashtra: 8,472 MSMEs shut
- Tamil Nadu: 4,412
- Gujarat: 3,148
- Rajasthan: 2,989
- Karnataka: 2,010
These five states have the most closures, showing differences between regions and the impact of economic pressures.
Root Causes
Despite many observers pointing out several problems, the administration did not give clear answers in its statement:
1. Complicated rules and frequent changes create regulatory barriers.
2. Many businesses face delays because of a shortage of raw materials.
3. A lack of qualified workers lowers operations and production.
4. Difficulties with ownership and registration, including issues with transfers, duplicates, and expired certifications, make matters worse.
These barriers limit the growth potential of the MSME sector.
Economic Implications
MSMEs are the backbone of India’s economy, employing ~11 crore workers. With an estimated 75,082 units closed since mid-2020, the sector has suffered massive job losses. Although the latest data lacks specific employment figures, previous government responses have linked ~49,342 closures (till July 2024) to roughly 317,641 jobs lost.
Government Response & Future Measures
The Union Budget and policy think-tanks are attempting to cushion the blow:
- Credit Guarantee enhancements: With ₹1–1.5 lakh crore cover planned under the 2025–26 Mutual Credit Guarantee Scheme
- Supply chain integration push: NITI Aayog urging better MSME linkages with larger corporates
However, effectiveness will depend on timely execution and targeting region-specific issues.
What MSMEs Should Do
- Strengthen compliance capability: Avoid penalties and shutdown risks
- Diversify supply chains: Lower vulnerability to raw-material shortages
- Invest in training: Fill gaps in skilled workforce
- Maintain clear registrations: Avoid certification or duplicate entry disputes
A near doubling of MSME closures in a single year is alarming. With sector-wide economic impact and livelihoods at stake, both business owners and policymakers must act decisively. Strengthening support systems now is key to rejuvenating India’s MSME engine.
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