MSME India: Why 99,000 Closures Don’t Tell the Whole Story

India’s micro, small, and medium enterprises (MSMEs) are living in a paradox. On one hand, the past five years have seen 98,990 units shut down, a figure that seems alarming at first glance. On the other, this represents just 0.15% of the total 6.62 crore enterprises registered under the Udyam and Udyam Assist platforms since July 2020.

Union MSME Minister Jitan Ram Manjhi, in his recent Lok Sabha reply, underscored that most closures stem from administrative or voluntary reasons, such as ownership transfers, duplicate entries or exits from the formal ecosystem, rather than systemic economic distress.

Yet the numbers tell a nuanced story.

The Closure Trend: Low in Percentage, High in Momentum

A closer look at year-on-year figures shows a steady climb in shutdowns:

FY21: 175 closures from 28.29 lakh registrations
FY22: 6,222 closures from 51.22 lakh registrations
FY23: 13,290 closures from 85.47 lakh registrations
FY24: 19,828 closures from 2.48 crore registrations
FY25: 39,446 closures from 2.06 crore registrations
FY26 (April–July): 20,029 closures from 42.08 lakh registrations

While proportionally small, the absolute increase signals a churn that can’t be dismissed.

The Other Side of the Ledger

For every MSME that shuts down, dozens are opening. Between July 2020 and December 2023 alone, 3.16 crore new enterprises joined the formal fold. Today, India counts nearly 6 crores operational MSMEs, employing over 24 crore people, making the sector a true backbone of the economy.

This expansion is fuelled by digital formalisation, government-backed credit and a new wave of entrepreneurship targeting sunrise industries.

Sectors on the Rise

The market isn’t just growing, it’s evolving. The MSME growth map increasingly points toward sectors with long-term global relevance:

Electronics & Semiconductors – With government incentives and foreign direct investment, India is building chip fabs and assembly units, integrating MSMEs into high-value tech supply chains.
Pharmaceuticals – Projected to hit $130 billion by 2030, the sector offers vast opportunities in generics, APIs and vaccine manufacturing for smaller firms.
Textiles & Technical Apparel – From Tirupur’s pivot to manmade fibres to high-performance athleisure exports, MSMEs are moving into R&D-driven niches.
Defense & Advanced Manufacturing – State-led industrial corridors are connecting local units to global procurement, particularly in aerospace, electronics and precision engineering.

Credit, Capacity and Confidence

The policy ecosystem is busy cushioning and catalysing MSMEs:

PMEGP, RAMP, PM Vishwakarma and MSME Champions for enterprise creation, productivity gains and artisan support.
ECLGS– ₹5 lakh crore in guaranteed pandemic-era credit to 14.6 lakh MSMEs.
Self-Reliant India Fund– ₹50,000 crore equity push for high-growth MSMEs.
Vivad se Vishwas– Return of 95% forfeited securities to pandemic-hit units.
Budget 2025– Higher credit guarantee limits, larger export loans and micro-enterprise credit cards.

From Survival to Scale

It’s tempting to read the rise in closures as a sign of fragility, but that ignores the scale of enterprise creation happening in parallel. In reality, MSMEs are in transition, moving from informal, fragmented operations toward formal, sector-focused and tech-enabled growth.

The key challenge now is sustainability. Registration is not the same as resilience. Without deeper investments in digital adoption, skill-building and market access, the churn may erode momentum. The real victory will be in not just starting MSMEs but keeping them competitive in a rapidly changing market.

India’s MSMEs are more than GDP engines they’re the nation’s bridge to global relevance in manufacturing, technology, and innovation. If policy, private capital and entrepreneurial grit align, the next five years could see this sector not just survive the churn, but define the new face of Indian enterprise.