The Current Status and Economic Contribution of MSMEs in India

Ask most people what keeps the Indian economy running day to day, and they will point to big factories or IT parks. The real answer is far less glamorous: a chai stall in Kanpur, a garment unit in Tiruppur, a plastics workshop in Rajkot. These are Micro, Small and Medium Enterprises, or MSMEs, and together they form the largest employment-generating segment of India’s economy after agriculture. Understanding where this sector stands today, and where it is falling short, matters for anyone studying the Indian economy.

How big is the MSME sector today 🔗

The Economic Survey 2025-26, tabled in Parliament by the Union Finance Minister, places MSMEs at the centre of India’s industrial story. The Survey estimates that the sector contributes around 31.1% to India’s GDP, roughly 35.4% of manufacturing output, and close to 48.58% of the country’s total exports. With over 7.47 crore enterprises employing more than 32.82 crore people, MSMEs are formally recognised as the second-largest source of employment in the country after agriculture.

These numbers have moved steadily over the past few years. Government statements through 2025 placed the GDP share closer to 30.1%, alongside a 45.73% share of exports, and the total count of registered units around 6.53 crore. The jump to nearly 7.5 crore units and a higher export share within the same year shows how quickly formal registration through the Udyam portal is expanding, rather than a sudden change in the underlying economy.

Where the “111 million jobs” figure comes from 🔗

An older, widely cited estimate holds that MSMEs employ around 111 million people, or roughly 11.1 crore workers. This figure traces back to a National Sample Survey conducted in 2015-16, which found the sector supporting close to 11.10 crore jobs across manufacturing, trade and other services. Newer Udyam-based counts show far higher numbers because they include every unit that has self-registered on the portal since 2020, including many informal micro-units that were never captured in the earlier survey. Both figures are correct for their respective methods; the direction is the same either way, MSMEs are the country’s biggest job-creating engine outside farming.

Micro enterprises dominate the pyramid 🔗

Within the MSME universe, the “M” for micro does the heavy lifting. Survey-based estimates put the number of micro enterprises at around 6.3 crore, compared to a few lakh small and medium units combined. Micro enterprises alone account for nearly 97% of total employment within the MSME sector, while small and medium units together contribute a little over 3%. This lopsided structure is by design: a micro-enterprise needs only a small amount of investment and turnover to get started, which makes it the natural entry point for first-generation entrepreneurs, whether that is a tailoring unit in a small town or a home-based food business.

Micro units are not confined to cities. They are equally, if not more, common in rural India, where they often double up as the only formal source of non-farm income for a household. This is precisely why government credit and subsidy schemes such as the Prime Minister’s Employment Generation Programme are weighted so heavily towards rural applicants.

An uneven map: state and district concentration 🔗

MSME growth in India is not spread evenly. As of early 2026, Maharashtra, Uttar Pradesh and Tamil Nadu together account for nearly 32% of all MSME registrations nationwide, with Maharashtra alone crossing one crore registered units. Gujarat, Karnataka, West Bengal and Rajasthan round out the next tier of leading states.

The concentration goes deeper than the state level. Detailed Udyam registration data shows that a handful of districts, led by Jalgaon in Maharashtra, followed by Ranchi and Visakhapatnam, account for a disproportionate share of new registrations. Even within top-performing states, average employment generated per firm varies widely; Maharashtra has the highest total MSME employment, but the average number of workers per firm is actually higher in states like Telangana and Karnataka. This tells us that raw registration numbers alone do not capture the quality or depth of MSME activity in a state.

The gender gap that persists 🔗

Ownership patterns within MSMEs reveal a significant gender skew. Analysis of Udyam registration data shows that male entrepreneurs own around 81% of registered MSMEs, while women own roughly 17 to 20%, with the remaining share held by other categories of ownership. The gap looks very different once informal micro-enterprises are counted separately. Research on the Udyam Assist Platform, which captures informal micro-units, finds that women own close to 70% of these informal enterprises, even though their share on the main formal Udyam portal remains around one-fifth. In other words, women entrepreneurs are highly active at the smallest, least formal end of the business spectrum, but far less visible once a business scales up and formalises.

The picture gets more complicated when you look at business survival. Parliamentary data shared in late 2025 revealed that nearly 24,000 women-led MSMEs shut down between July 2020 and November 2025, resulting in a loss of over 1.6 lakh jobs. This happened even as new registrations by women entrepreneurs climbed sharply during the same period. State-wise data on women-owned MSMEs also shows the same geographic skew seen in the broader sector, with Maharashtra, Tamil Nadu and Karnataka leading in absolute numbers of women-led registrations. Limited access to formal credit and persistent, often unconscious, bias in lending decisions are commonly cited as reasons why women-owned businesses find it harder to grow and survive compared to their male-owned counterparts.

What kind of businesses dominate the sector 🔗

Contrary to the popular image of MSMEs as small factories, trade is actually the largest single activity within the sector. Recent registration data shows that trading enterprises make up close to 43% of registered MSMEs, services around 36%, and manufacturing about 21%. This composition has shifted over the years; retail and wholesale trade were formally brought within the MSME definition only in mid-2021, which pulled in a large number of traders who were not previously eligible for MSME benefits.

Social category data adds another layer to this picture. Government publications show that around 57% of new MSME units belong to the General category, about 31% to the Other Backward Classes category, roughly 8.5% to Scheduled Castes, and under 3% to Scheduled Tribes. This mirrors the broader concern around uneven access: entrepreneurship among historically disadvantaged groups still lags well behind their share of the population, even as overall MSME registration numbers grow rapidly.

Why closing these gaps matters for the economy 🔗

India’s MSME growth story looks impressive at the aggregate level, but the underlying data tells a story of concentration rather than balance. A handful of states capture a disproportionate share of registrations. Formal ownership skews heavily male. And most business activity clusters around trade rather than manufacturing, which limits the sector’s contribution to value-added output and export competitiveness in the long run.

Government schemes have started responding to this. The Raising and Accelerating MSME Performance programme and revised, more generous investment and turnover limits announced in the Union Budget 2025 are both aimed at helping micro-units grow into small and medium ones without immediately losing access to support. Targeted efforts under schemes like PM Vishwakarma, which supports artisans working with their hands, and continued credit guarantee expansion through CGTMSE, are steps toward reaching entrepreneurs in underserved regions and among disadvantaged groups. Whether these measures can genuinely rebalance the sector, rather than simply grow its aggregate numbers, will decide how inclusive India’s MSME-led growth actually turns out to be over the next decade.

What do you think? If women already dominate the informal micro-enterprise segment, what specific barriers do you think are keeping most of them from registering formally and scaling up? And should policy focus more on getting new states to catch up with Maharashtra and Tamil Nadu, or on deepening MSME activity within the states that already lead?

References

1. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2219984&reg=3&lang=1
2. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2142170&reg=48&lang=2
3. https://www.cii.in/Sectors.aspx?SectorID=S000000007
4. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2035073&reg=3&lang=2
5. https://www.ibef.org/industry/msme
6. https://dcmsme.gov.in/Udyam%20Registration%20Bulletin%20-%20V.pdf
7. https://www.ijfmr.com/papers/2026/2/74348.pdf
8. https://www.businessworld.in/article/india-loses-nearly-24-000-women-led-msmes-in-last-five-years-582605
9. https://www.mospi.gov.in/state-wise-total-women-owned-msmes-registered-classified-and-their-employment-investment-turnover