The Micro, Small, and Medium Enterprises (MSME) sector remains a vital contributor to employment and economic development in Tamil Nadu, providing jobs to approximately 25.6 million individuals across the state, as highlighted in its inaugural Economic Survey.
According to Udyam Registration data, Tamil Nadu is home to 3.56 million MSMEs, with 1.07 million in the manufacturing sector and 2.49 million in services as of February 2025.
The role of MSMEs in the services sector is particularly impactful, reflecting broader trends in employment throughout Tamil Nadu. The Periodic Labour Force Survey (2023-24) indicates that a striking 54.63 percent of the urban workforce in Tamil Nadu is engaged in service-related jobs, significantly surpassing the national average of 28.42 percent. Among these workers, 16.28 percent are involved in trade and motor vehicle repair, 7.53 percent in transport and storage, 6.28 percent in information and communication, 5 percent in education, 4.86 percent in accommodation and food services, 2.84 percent in financial and insurance services, and 11.84 percent in various other service sectors.
The resurgence of Tamil Nadu’s service industry is reflected in the considerable growth of service-oriented MSMEs. Between 2019-20 and 2024-25, the number of these enterprises registered under the Udyam Registration Certificate jumped from 145,000 to 2.49 million. Impressively, 99.18 percent of these are categorized as micro-enterprises, with 0.78 percent as small and 0.004 percent as medium-sized businesses.
Despite this progress, Tamil Nadu has also experienced the second-highest number of MSME closures in India. From FY21 to FY25 (as of February 28), over 35,500 MSMEs across the nation ceased operations under the Udyam Registration Portal, with 35,567 closures reported in Tamil Nadu—second only to Maharashtra, according to a recent response in the Rajya Sabha.
Many MSMEs have been compelled to shut their doors due to challenges in adhering to GST regulations. Since businesses rely on a supply chain, each entity in that chain must ensure proper GST compliance. A lapse by even one unit can cause disruptions for others, leading to closures, explained J. Jeyaranjan, Executive Vice-Chairman of the State Planning Commission.
Recent data from the Ministry of Statistics and Programme Implementation reveals that the contribution of MSMEs to the nation’s GDP has varied over the past five years. In both 2018-19 and 2019-20, MSMEs contributed 30.5 percent to GDP. However, this share dipped to 27.3 percent in 2020-21, likely due to the adverse effects of the Covid-19 pandemic. The sector saw a rebound, contributing 29.6 percent in 2021-22 and rising further to 30.1 percent in 2022-23, signaling a recovery in the industry.
