MSME closures nearly double in FY25, with 35,567 units shutting down across India

New Delhi, March 19:  India has witnessed an alarming surge in the closure of micro, small, and medium enterprises (MSMEs) in the financial year 2024-25, with 35,567 businesses shutting down as of February 28, 2025. This marks a near doubling from the previous financial year, which recorded 19,828 closures, signaling distress in a sector often described as the backbone of India’s economy.

The data, disclosed by Minister of State for MSMEs Shobha Karandlaje in a written reply to the Rajya Sabha on Tuesday, highlights a worrisome trend in MSME failures. Since the launch of the Udyam Portal on July 1, 2020—an initiative designed to streamline business registration—the cumulative number of closures has reached 75,082, with the current financial year’s shutdowns accounting for nearly half of this total.

The figures indicate a sharp increase in MSME shutdowns over the past five years. While FY21 saw only 175 closures, the number escalated to 6,222 in FY22, 13,290 in FY23, and 19,828 in FY24. The FY25 tally of 35,567 closures is nearly equal to the combined total of businesses that shut down over the previous four years, painting a grim picture of sectoral health.

Among the states, Maharashtra has been hit the hardest, recording 8,472 MSME closures in FY25. Tamil Nadu follows with 4,412 closures, while Gujarat (3,148), Rajasthan (2,989), and Karnataka (2,010) have also reported significant numbers. The data underscores regional disparities in the MSME crisis, with industrial and manufacturing hubs facing severe disruptions.

Despite the government’s announcement of several pro-MSME measures in the Union Budget—such as increased investment and turnover limits, as well as enhanced credit guarantees—the sharp increase in shutdowns raises concerns about the effectiveness of these interventions. Minister Karandlaje’s response did not provide specific reasons for the closures, leaving unanswered questions about the root causes of this distress.

Furthermore, no official data was provided on job losses linked to these closures. However, a previous statement by Minister for MSMEs Jitan Ram Majhi in July 2024 indicated that 3.18 lakh jobs were lost due to 49,342 enterprise closures since July 2020. Given the current year’s significantly higher closure rate, the employment impact could be even more severe.

Minister Majhi had previously attributed MSME shutdowns to factors such as “change in company ownership, certificates no longer required, duplicate registrations, and other similar reasons.” However, industry experts and reports have pointed to rising operational costs, raw material shortages, lack of skilled labor, and complex regulatory policies as major contributors to the MSME crisis.

As of February 28, 2025, the total number of registered MSMEs across India’s states and union territories stands at 6.05 crore. While this figure highlights the sector’s vast presence, the accelerating rate of closures demands immediate policy attention.

The MSME sector, which contributes nearly 30% to India’s GDP and 45% to its exports, plays a crucial role in job creation and economic stability. Experts argue that streamlining regulatory processes, ensuring timely access to credit, stabilizing raw material supply chains, and addressing labor shortages are essential to reversing the current trend.

With closures nearly doubling in just one year, India’s MSME ecosystem stands at a crossroads. Addressing the crisis with effective policy interventions will be crucial in safeguarding millions of livelihoods and maintaining the sector’s contribution to the country’s economic growth.