49,000 MSME closed down over 10 years, 3 lakh jobs lost, Govt tells Lok Sabha

Over 300,000 people were made jobless due to the closure of nearly 50,000 small businesses in the last 10 years, the government said.

In a written reply, the minister for micro, small and medium enterprises (MSMEs) Jitan Ram Majhi told the Lok Sabha on Thursday that out of the million registered MSMEs, 49,342 have closed, resulting in the loss of 317,641 jobs.

Those who lost their jobs were from a total MSME workforce of 181.6 million registered on the Udyam registration portal since its inception on 1 July 2020.

"Of these, 0.17% or 49,342 enterprises with employment of 317,641 de-registered or showed closure on the portal during the last ten years,” he said.

As per the latest available annual PLFS reports, the estimated unemployment rate for persons aged 15 years and above was 4.2% in 2020-21, 4.1% in 2021-22, and 3.2% in 2022-23, the ministry of labour and employment said.

Also Read: Over 300,000 people were made jobless due to the closure of nearly 50,000 small businesses in the last 10 years, the government said.

As per the data provided by Manjhi, Maharashtra saw the most closures, with 12,233 MSMEs shutting down, resulting in 54,053 job losses. This was followed by Tamil Nadu (6,298 closures, 43,324 job losses), Uttar Pradesh (3,425 and 33,230), Gujarat (4,861 and 22,345) and Bihar (2,414 and 15,317).

Madhya Pradesh, under BJP rule for over 19 years, has seen the closure of 1,653 MSME units, resulting in the loss of 11,727 jobs.

“The closures are attributed to various reasons including changes in company ownership, redundant certificates, and duplicate registrations,” the minister told the House.

Delhi saw 947 closures with 8,210 jobs lost, West Bengal 1,548 closures affecting 8,856 jobs, and Kerala 1,336 closures resulting in 12,672 jobs lost.

In her seventh budget speech on Tuesday, finance minister Nirmala Sitharaman announced several measures to boost the MSME sector.

The budget emphasized financial and technological support for MSMEs, including a credit guarantee scheme for machinery loans without collateral, a self-financing guarantee fund offering up to ₹100 crore per borrower, and a new assessment model for MSME credit by public sector banks based on digital footprints.

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Additionally, the budget proposed enhanced credit support during stress periods to prevent MSMEs from becoming NPAs, raises the Mudra loan limit to ₹20 lakh, and plans to open 24 new SIDBI branches in MSME clusters within three years. E-commerce export hubs will also be established in a PPP mode to help MSMEs and traditional artisans access international markets with a seamless regulatory framework.

MSMEs contribute about 45% to India's total exports

Currently, MSMEs contribute about 45% to the country's total exports, according to a Global Trade Research Initiative (GTRI) report. However, experts believe there is immense scope to increase this share further.

A report jointly published by Niti Aayog and Foundation for Economic Development in March this year noted that exports remain an under-utilized opportunity for MSMEs, even as they are called the powerhouse of the Indian economy and contribute significantly to employment generation, exports, and overall economic growth.

Citing data from the Udyam portal, the NITI Aayog report said that despite the opportunity for MSMEs to pursue exports, only 0.95% of MSMEs are engaged in it. Out of the 15.8 million MSMEs registered on Udyam, only over 150,000 units claimed to export their goods and services.

In terms of MSME exports through the e-commerce route, data from GTRI showed that India significantly lags a comparable economy like China. GTRI data showed that in 2022, MSMEs in China exported goods worth over $200 billion through e-commerce platforms, while India's e-commerce export is barely $2 billion that year.

The focus on MSME exports has gained momentum at a time when India's merchandise exports dipped 3.11% year-on-year (y-o-y) in FY24 to $437.06 billion, according to data from the commerce ministry.

MSMEs contribute about 27% to India's GDP and employ more than 110 million people, making it the second largest employer in the country, after agriculture.