India’s MSME sector is facing a serious challenge, with a large number of businesses shutting down and jobs being affected.
According to data presented in Parliament, 1,21,805 MSME units closed between FY2023-24 and FY2025-26.
Maharashtra recorded the highest number of closures at 28,764 units during this period.
FY2025-26 was particularly difficult, with around 62,747 MSMEs shutting down compared with 39,446 closures in FY2024-25.
These closures affected around 3.70 lakh jobs in FY2025-26, compared with nearly 2.60 lakh jobs in the previous year.
WHY ARE MSMEs STRUGGLING?
Small businesses often operate with limited cash reserves, making them more vulnerable to rising costs and delayed payments.
Some major challenges include:
• Rising input and operating costs
• Difficulty accessing affordable finance
• Increasing competition
• Cash-flow pressure
• Weak or changing market demand
MAHARASHTRA SEES THE HIGHEST CLOSURES
Maharashtra reported 28,764 MSME closures over the three-year period, the highest among states.
However, the picture is not entirely negative.
India is still seeing strong MSME registrations and employment growth. Government data shows MSME employment increased 16.5% year-on-year to around 8.05 crore in FY2025-26.
WHAT DOES THIS MEAN?
The bigger concern is not simply the number of businesses being started, but how many can survive and grow.
For MSMEs, strong cash-flow management, access to credit, cost control, compliance and steady demand are becoming increasingly important.
India’s MSME sector is growing, but these closure numbers highlight a bigger question:
ARE WE CREATING MORE MSMEs, OR HELPING THEM SURVIVE?
Frequently asked questions
- 1. How many MSMEs closed in India between FY2023-24 and FY2025-26?
- The article reports that 1,21,805 MSME units closed during this three-year period. Verify the cumulative figure against the original parliamentary response before publication.
- 2. How many MSMEs closed in FY2025-26?
- According to parliamentary data reported by The Economic Times, 62,747 MSME units closed in FY2025-26, compared with 39,446 in FY2024-25.
- 3. Which Indian state recorded the highest number of MSME closures?
- The article identifies Maharashtra, with 28,764 closures over the three-year period. The state-wise figure should be confirmed against the original government data.
- 4. How many jobs were affected by MSME closures in FY2025-26?
- The reported figures indicate that 3,70,493 jobs were affected in FY2025-26, compared with 2,60,116 in FY2024-25.
- 5. Why are MSMEs shutting down in India?
- Potential challenges include rising operating costs, limited access to affordable credit, delayed customer payments, cash-flow shortages, competition and changing market demand. The reasons can differ across businesses and industries.
- 6. Is MSME employment increasing despite business closures?
- Yes. Reported employment under the Udyam registration portal rose to around 8.05 crore in FY2025-26 from 6.91 crore in FY2024-25, an increase of approximately 16.5%.
- 7. How can small businesses manage cash-flow problems?
- Businesses can monitor receivables, follow up on overdue invoices, prepare cash-flow forecasts, control unnecessary expenses and maintain an emergency reserve wherever possible.
- 8. What financing options are available to MSMEs in India?
- Eligible businesses may explore bank loans, working-capital facilities, credit-guarantee-backed lending and government-supported MSME schemes. Eligibility and terms depend on the scheme, lender and business profile.
- 9. Why are delayed payments a major concern for MSMEs?
- Delayed payments can leave small businesses without enough working capital to pay suppliers, employees, rent and other operating expenses, even when they have recorded sales.
- 10. What is the biggest challenge facing India's MSME sector?
- A key challenge is ensuring that businesses can sustain operations, manage working capital, access finance and generate stable demand. New registrations and employment growth are important, but business survival also matters.
