The closure of Micro, Small, and Medium Enterprises (MSMEs) in India has had a significant impact on the job market. According to government data, nearly 50,000 MSMEs have shut down over the past decade, leading to over 300,000 people losing their jobs. This alarming trend underscores the need for robust support measures to revitalize the MSME sector and safeguard employment.
The Extent of MSME Closures
In a written reply to the Lok Sabha, Minister for MSMEs Jitan Ram Majhi revealed that out of the million registered MSMEs, 49,342 have closed, resulting in the loss of 317,641 jobs. These closures represent 0.17% of the total MSME workforce registered on the Udyam portal since its inception on July 1, 2020.
Regional Impact of MSME Closures
The closures have been unevenly distributed across states, with Maharashtra being the hardest hit, witnessing the closure of 12,233 MSMEs and the consequent loss of 54,053 jobs. Tamil Nadu, Uttar Pradesh, Gujarat, and Bihar also faced significant job losses due to MSME shutdowns. These closures are attributed to various factors, including changes in company ownership, redundant certificates, and duplicate registrations.
Government Measures to Support MSMEs
In her seventh budget speech, Finance Minister Nirmala Sitharaman announced several measures to bolster the MSME sector. Key initiatives include 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.
Enhanced Credit Support and Export Opportunities
The budget also proposed enhanced credit support during stress periods to prevent MSMEs from becoming Non-Performing Assets (NPAs), raising the Mudra loan limit to ₹20 lakh, and establishing 24 new SIDBI branches in MSME clusters within three years. Additionally, e-commerce export hubs will be created in a Public-Private Partnership (PPP) mode to help MSMEs and traditional artisans access international markets with a seamless regulatory framework.
The Role of MSMEs in the Indian Economy
MSMEs are crucial to India’s economy, contributing about 45% to the country’s total exports and employing over 110 million people. Despite their significant role, exports remain an under-utilized opportunity for MSMEs. A report by Niti Aayog and the Foundation for Economic Development highlighted that only 0.95% of MSMEs are engaged in exporting their goods and services.
Conclusion
The closure of MSMEs and the resultant job losses pose a significant challenge to the Indian economy. However, the government’s proactive measures to support the sector, enhance credit access, and boost exports are steps in the right direction. Strengthening the MSME sector is essential for sustaining employment, driving economic growth, and increasing India’s global trade footprint.
