India's micro, small, and medium enterprises (MSMEs) are facing an alarming wave of closures, with over 75,082 units shutting down as of March 17, 2025, according to government data. The annual closure rate has surged dramatically, reaching 35,567 shutdowns in FY25, a steep rise from 19,828 in FY24, 13,290 in FY23, 6,222 in FY22, and just 175 in FY21.
The states hit hardest include Maharashtra with 8,472 closures, followed by Tamil Nadu (4,412), Gujarat (3,148), Rajasthan (2,989), and Karnataka (2,010).
These figures, shared by Shobha Karandlaje, Minister of State in the MSME Ministry, highlight a concerning trend despite 6.1 crore MSMEs currently registered on the Udyam portal. The closure rate, though just 0.12%, signals distress in the sector, which is often regarded as the backbone of India's economy.
Can MSMEs Bounce Back? Govt Plans Rs 1.5 Lakh Crore Credit Guarantee
In a bid to support struggling businesses, the government is set to roll out a Mutual Credit Guarantee Scheme in FY26, offering Rs 1-1.5 lakh crore in credit cover. Under this scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will provide a 60% guarantee cover on loans up to Rs 100 crore for MSMEs looking to invest in equipment and machinery.
Meanwhile, NITI Aayog's Vice Chairman, Suman Bery, has stressed the need for MSMEs to be integrated into larger supply chains to sustain economic growth. "The real challenge isn't growth, but maintaining momentum. MSMEs must be linked to bigger players to drive India's competitiveness and achieve 7-8% economic growth," Bery noted at a CII event.
What's Next for India's MSMEs?
With rising closures and new policy interventions, the road ahead for MSMEs remains uncertain. Will the new credit scheme and supply chain integration efforts be enough to revive the sector? Or is India's small business ecosystem facing deeper structural challenges? Only time will tell.
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