Tamil Nadu’s MSME sector employs 2.56 crore people, second-highest in MSME closures

Micro, Small and Medium Enterprises (MSME) sector continues to be a key driver of employment and economic growth in Tamil Nadu, providing jobs to 2.56 crore workers across the State, pointed out its first Economic Survey. Quoting Udyam Registration data, Tamil Nadu had 35.56 lakh MSMEs, with 10.69 lakh in manufacturing and 24.87 lakh in services as of February 2025.

The services sector MSMEs play a particularly significant role, aligning with Tamil Nadu’s broader employment trends. As per the Periodic Labour Force Survey (2023-24), 54.63 per cent of the urban workforce in Tamil Nadu is engaged in services, well above the national average of 28.42 per cent. Within this, 16.28 per cent of workers are employed in trade and motor vehicle repair, 7.53 per cent in transport and storage, 6.28 per cent in information and communication, 5 per cent in education, 4.86 per cent in accommodation and food services, 2.84 per cent in financial and insurance services and 11.84 per cent in other service sectors.

The revival of Tamil Nadu’s services sector is also evident in the rapid growth of services-oriented MSMEs. Between 2019-20 and 2024-25, the number of such enterprises registered under the Udyam Registration Certificate surged from 1.45 lakh to 24.88 lakh. Notably, 99.18 per cent of these are micro-enterprises, while 0.78 per cent are small and 0.004 per cent are medium-sized businesses. However, Tamil Nadu has also recorded the second-highest number of MSME closures in India. More than 35,500 MSMEs across the country ceased operations during FY21 and FY25 (as on February 28) under the Udyam Registration Portal, with 35,567 units in Tamil Nadu alone, second only to Maharashtra, as per a recent Rajya Sabha reply.

“Many MSME units were forced to shut down due to difficulties in complying with GST regulations. Since businesses operate as part of a supply chain, every unit within the chain must ensure proper GST compliance. If even one unit in the chain fails to comply, it can disrupt operations for others, ultimately leading to closures,” said J Jeyaranjan, Executive Vice-Chairman of the State Planning Commission.

As per the latest information from the Ministry of Statistics & Programme Implementation, the contribution of MSMEs to the country’s GDP over the last five years has fluctuated. In 2018-19 and 2019-20, MSMEs contributed 30.5 per cent to the GDP. However, the share declined to 27.3 per cent in 2020-21, likely due to the impact of the Covid-19 pandemic. It rebounded to 29.6 per cent in 2021-22 and further increased to 30.1 per cent in 2022-23, indicating a recovery in the sector.