Data: MSMEs estimated at 7.3 Crores as of 2023-24, Wide Variation in State Sectoral Distribution
Over the past five decades, the Micro, Small, and Medium Enterprises (MSME) sector has grown into a vital and dynamic force in India’s economy. The Annual Survey of Unincorporated Sector Enterprises (ASUSE) of the NSSO estimates the number of MSMEs at 7.3 crores as of 2023-24. There is a wide variation in the sectoral distribution of MSMEs within and across states.
Over the past five decades, the Micro, Small, and Medium Enterprises (MSME) sector has grown into a vital and dynamic force in India’s economy. Beyond driving economic growth, it plays a crucial role in social development by nurturing entrepreneurship and creating vast employment opportunities with relatively low investment, second only to agriculture in job generation. According to the 73rd round of the National Sample Survey (2015-16), India had approximately 633.88 lakh unincorporated, non-agricultural MSMEs engaged in various sectors, including manufacturing (196.65 lakh), trade (230.35 lakh), and other services (206.85 lakh). The micro-enterprise segment dominates this landscape, making up over 99% of all MSMEs, followed by small and medium enterprises, which account for just 0.52% and 0.01%, respectively. Interestingly, MSMEs are nearly evenly distributed between rural (51.25%) and urban (48.75%) areas, underscoring their widespread impact across the country.
In today’s story, we look at some key statistics on MSMEs and their performance.
Over 7.3 Crore Enterprises estimated in India as per ASUSE 2023-24
India’s unincorporated sector plays a crucial role in the economy, providing employment to millions across skill levels and contributing significantly to GDP. Recognizing the importance of the unincorporated sector, the NSSO launched the Annual Survey of Unincorporated Sector Enterprises (ASUSE) to track economic and operational trends in non-agricultural businesses, including manufacturing, trade, and services. The first full Annual Survey of Unincorporated Sector Enterprises (ASUSE) was conducted in 2021-22, followed by 2022-23 and 2023-24. However, before ASUSE, the NSSO’s 67th and 73rd Rounds also covered unincorporated non-agricultural enterprises (excluding construction). The 73rd Round expanded its scope by including additional activities, such as non-captive electricity generation, transmission, and distribution by units not registered with the Central Electricity Authority (CEA).
The 67th Round estimated a total of 5.77 crore establishments, with 3.09 crore in rural areas and 2.68 crore in urban areas. This increased in the 73rd Round to 6.34 crore establishments, with 3.25 crore in rural areas and 3.09 crore in urban areas.
Furthermore, data from ASUSE clearly shows that India’s unincorporated non-agricultural sector has experienced substantial growth over the past three years. The total number of establishments grew from 5.97 crore in 2021-22 to 6.50 crore in 2022-23 (8.88% growth), and further to 7.34 crore in 2023-24 (12.84% growth). Among the three major sectors, manufacturing establishments increased from 1.73 crore (28.90% of total) in 2021-22 to 1.78 crore (27.41%) in 2022-23 and further to 2.01 crore (27.45%) in 2023-24. The trade sector remained relatively stable, with 2.25 crore establishments in both 2021-22 (37.69% of total) and 2022-23 (34.71%), rising slightly to 2.28 crore (31.07%) in 2023-24. However, ‘Other Services’ saw the fastest expansion, growing from 2.00 crore (33.42% of total) in 2021-22 to 2.46 crore (37.88%) in 2022-23 and further to 3.04 crore (41.48%) in 2023-24.
The sector has seen consistent growth in both rural and urban areas. Rural establishments grew from 3.32 crore in 2021-22 to 3.56 crore in 2022-23 (7.23% growth) and further to 3.97 crore in 2023-24 (11.52% growth). Meanwhile, the number of urban establishments increased at a faster pace, rising from 2.65 crore in 2021-22 to 2.94 crore in 2022-23 (10.94% growth) and further to 3.37 crore in 2023-24 (14.44% growth), highlighting a stronger expansion in cities.
Own Account Establishments (OAEs), which operate without hired workers, continue to dominate, growing from 5.13 crore in 2021-22 to 5.53 crore in 2022-23 and further to 6.34 crore in 2023-24. In contrast, Hired Worker Establishments (HWEs), though increasing, form a smaller share, growing from 84 lakh in 2021-22 to 97 lakh in 2022-23 and reaching 1 crore in 2023-24.
Proportion of employees in Manufacturing sector declining
The unincorporated non-agricultural sector plays a crucial role in employment generation. Looking at historical trends, in the 67th Round, the sector employed around 10.8 crore workers, with 51% in urban areas and 49% in rural areas. The ‘Other Services’ sector had the highest share of workers (36%) across both urban and rural areas, while ‘Trade’ and ‘Manufacturing’ each accounted for around 32% of total employment. Further, in the 73rd Round, approximately 11.13 crore workers were engaged in unincorporated non-agricultural enterprises (excluding construction), with 6.14 crore in urban areas (55.2%) and 4.99 crore in rural areas (44.8%). Employment was primarily concentrated in trading enterprises (34.8%), followed by other services (32.8%) and manufacturing (32.4%).
In ASUSE 2021-22, it is estimated that the sector employed about 9.79 crore workers, with urban employment at 5.03 crore and rural employment at 4.76 crore. During ASUSE 2022-23, the sector provided employment to around 10.96 crore individuals with 5.72 crore workers in urban areas and 5.24 crore in rural areas. The employment in ASUSE 2023-24 is estimated at 12.06 crores, of which 6.45 crores were in urban areas, while 5.61 crores were in rural areas. This marks a growth of over 10% compared to ASUSE 2022-23, with an increase of nearly 1 crore workers.
Interestingly, the proportion of employment in manufacturing declined from 32.3% in the 67th Round to 27.9% in ASUSE 2023-24, whereas the proportion in trading improved marginally from 31.6% to 32.9% and that of ‘Other Services’ from 36% to 39%.
Uttar Pradesh and West Bengal account for over one-fourth of all establishments in 2023-24
Over the years, Uttar Pradesh and West Bengal have consistently led in the number of unincorporated non-agricultural enterprises in India. According to the 67th Round of NSS, Uttar Pradesh had the highest share (14.5%), followed by West Bengal (12.6%), Andhra Pradesh (9.7%), Maharashtra (8.9%), and Tamil Nadu (7.8%), together accounting for 53.6% of all enterprises in the country. In the manufacturing sector, West Bengal led with 16.1%, followed by Uttar Pradesh (13.6%), Tamil Nadu (9.6%), Andhra Pradesh (9.4%), and Gujarat (8.2%), making up 56.9% of all manufacturing enterprises. Uttar Pradesh had the largest share of trading enterprises (16.5%), followed by West Bengal (10.9%), Maharashtra (9.0%), Andhra Pradesh (7.7%), and Tamil Nadu (6.1%), together constituting 50.2% of total trading businesses. In the other services sector, Uttar Pradesh topped with 13.3%, followed by Andhra Pradesh (12.0%), West Bengal (11.4%), Maharashtra (9.6%), and Tamil Nadu (7.8%), making up 54.1% of service enterprises nationwide.
In the 73rd Round, Uttar Pradesh (14.2%) and West Bengal (13.99%) had nearly equal shares of total enterprises. West Bengal had the highest share in rural areas (17.44%), while Uttar Pradesh led in urban areas (13.43%), followed by Tamil Nadu (10.86%). Overall, Uttar Pradesh, West Bengal, Tamil Nadu, Maharashtra, and Karnataka accounted for nearly half of all unincorporated non-agricultural enterprises in India.
Further, the sectoral distribution of enterprises varied across states. In Assam, Uttarakhand, Haryana, and Delhi, less than 20% of enterprises were in manufacturing, whereas in West Bengal, Telangana, Gujarat, Tamil Nadu, and Jammu & Kashmir, over 33% of businesses were manufacturing-based, with West Bengal having the highest share (47.12%). In 10 out of 22 major states, trading enterprises formed 40% or more of total businesses, with Assam leading at 55.13%. Conversely, Telangana and West Bengal had the lowest share of trading enterprises (around 25%). In 11 states, at least one-third of enterprises were engaged in other services, with Kerala having the highest share (45.85%) and Jammu & Kashmir the lowest (25.23%).
The ASUSE 2021-22 estimated that in rural areas, Uttar Pradesh (14.66%), West Bengal (14.17%), and Bihar (7.18%) had the most establishments, while in urban areas, Maharashtra (11.81%), Uttar Pradesh (10.90%), and West Bengal (9.99%) led. Across both rural and urban combined, Uttar Pradesh (12.99%), West Bengal (12.31%), and Maharashtra (8.81%) had the highest number of enterprises. Uttar Pradesh topped in trade (15.87%) and other services (11.91%), while West Bengal had the highest share in manufacturing (16.56%).
In ASUSE 2022-23, Uttar Pradesh (15.83%), West Bengal (12.67%), and Bihar (7.88%) had the highest number of unincorporated non-agricultural establishments in the rural sector. In the urban sector, Maharashtra (12.04%), Uttar Pradesh (11.39%), and West Bengal (11.27%) had the most establishments. When considering both rural and urban areas combined, Uttar Pradesh (13.82%), West Bengal (12.03%), and Maharashtra (9.37%) led in the total number of such enterprises.
In ASUSE 2023-24, Uttar Pradesh (12.78%), West Bengal (12.63%), and Maharashtra (8.78%) remained the top three states with the highest number of unincorporated non-agricultural establishments.
Almost 77 thousand MSMEs shutdown and 5 Lakh affected due to closure since 2020-21
Micro, Small, and Medium Enterprises (MSMEs) face unique challenges due to their limited financial resources and narrow profit margins. Key concerns include the unavailability of credit facilities and working capital, delayed payments, labour shortages, and rising raw material costs. Many MSMEs struggle to sustain operations due to insufficient working capital and an inability to meet loan repayment obligations.
To support MSME growth, the Government of India introduced a revised classification system based on investment in plant and machinery as well as annual turnover. This new framework eliminated the distinction between manufacturing and service enterprises, aiming to create a more inclusive environment for business expansion. Additionally, to streamline MSME registration under this updated classification, the Ministry of MSME launched the Udyam Registration Portal on 01 July 2020.
The data on the MSMEs shut down since the launch of the portal shows that around 76,892 MSMEs shut down, while almost 5 Lakh jobs were affected. Among the states, Maharashtra topped with 19,101 MSMEs shut down, followed by 9,740 in Tamil Nadu, and Gujarat with 7,269. Out of the 5 Lakh employment affected, around 89,923 employees are in Maharashtra, followed by 68,125 in Tamil Nadu and 44,253 in Uttar Pradesh.