SRINAGAR: The Government of India has confirmed that nearly one lakh Micro, Small and Medium Enterprises (MSMEs) have shut down across the country over the past five years. However, the Ministry of MSME has maintained that the number represents a negligible share—just 0.15 per cent—of the total enterprises registered since July 2020.
Responding to a starred question in the Lok Sabha on Thursday, Minister of MSME Jitan Ram Manjhi said that a total of 98,990 enterprises had deregistered on the government’s Udyam and Udyam Assist platforms between July 1, 2020, and July 28, 2025. During this same period, over 6.62 crore enterprises were registered, according to official data from the Udyam Registration Portal.
The number of shutdowns has shown a year-on-year rise. In the financial year 2020–21, only 175 units closed. That figure rose to 6,222 in 2021–22, 13,290 in 2022–23, and 19,828 in 2023–24. The highest number was recorded in 2024–25, with 39,446 enterprises shutting down. The trend appears to be continuing into the current financial year, with 20,029 closures recorded by the end of July.
The government cited multiple reasons for the closures, such as a change in ownership, the enterprises no longer requiring certification, duplicate registrations, and voluntary shutdowns. However, it did not attribute the closures to any specific government policy failures. Instead, the Ministry noted that the proportion of enterprises that have shut down remains extremely small in relation to the total registered base.
When asked whether government policy played a role in the closures, the Ministry avoided any direct admission. Instead, it pointed to a range of support schemes aimed at sustaining the sector, especially in the aftermath of the COVID-19 pandemic.
The government claimed that it has launched several initiatives to protect, revive, and financially strengthen MSMEs. Among them is the Emergency Credit Line Guarantee Scheme (ECLGS), which provided a total credit line of Rs 5 lakh crore during the pandemic period. According to a research report by the State Bank of India published in January 2023, nearly 14.6 lakh MSME accounts were saved through the scheme, with about 98.3 per cent of these belonging to the micro and small enterprise categories.
Further, the Ministry noted the launch of the Self-Reliant India (SRI) Fund, which aims to infuse Rs 50,000 crore in equity capital into the MSME sector. The fund comprises Rs 10,000 crore from the government and Rs 40,000 crore through private equity and venture capital.
Additional support includes extending non-tax benefits for three years to enterprises that experience an upward change in status, and the Vivad se Vishwas scheme, under which 95 percent of the forfeited bid or performance security is being returned to MSMEs that failed to execute contracts during the pandemic.
The 2025 Union Budget has also introduced further credit facilitation measures. These include the enhancement of credit guarantee coverage for micro and small enterprises from Rs 5 crore to Rs 10 crore, provision of term loans up to Rs 20 crore for well-performing exporter MSMEs, and the rollout of customised credit cards for micro enterprises with limits of up to Rs 5 lakh.
While the Ministry insists that the proportion of closures is low, the steady upward trend over the years has triggered concern among economists and industry watchers. The MSME sector plays a vital role in India’s economy, contributing nearly 30 per cent to GDP and employing over 11 crore people.
Industry associations have often pointed to rising input costs, lack of timely credit, and the slow pace of post-pandemic recovery as key stressors affecting smaller enterprises. Critics argue that while policy initiatives exist on paper, ground-level implementation and access to funds remain significant challenges for many entrepreneurs.
As of now, the government has expressed confidence in its ongoing revival and support programmes and reiterated its commitment to fostering a more resilient MSME ecosystem across states and union territories. However, with 2025 already witnessing over 20,000 closures in just four months, the efficacy of these interventions is likely to come under greater scrutiny in the months ahead.
