Ahmedabad: Known for its industrial might, Gujarat is grappling with a grim reality — the closure of 5,974 micro, small and medium enterprises (MSMEs) since July 2020. According to data from the Union ministry of commerce and industries, tabled in Parliament recently, the state now ranks third in the closure of MSMEs, trailing Maharashtra, where 15,220 MSMEs were shut, and Tamil Nadu, where 7,894 MSMEs were shut from July 1, 2020, to Nov 15, 2024.
The aftermath of the pandemic, coupled with soaring inflation and tepid demand, has left small businesses gasping for survival, according to industry players. The situation is particularly true for the textiles and chemical sectors in the state, where declining demand and rising inflationary pressures added to the surmounting cost of operations.
"The post-Covid stress created a domino effect. Many MSMEs were already struggling, and inflationary pressures pushed them over the edge. Govt came up with the CGTMSE scheme to address cashflow concerns among small businesses, but several MSMEs, particularly micro enterprises, did not have banking facilities and thus, were unable to avail CGTMSE benefits. Due to mounting cashflow concerns, they were compelled to shut shop," said Pathik Patwari, chairman, Indian Chamber of Commerce (ICC) Gujarat.
"Many others also diversified businesses and shut shops to start afresh. Upgradation and skill development also impacted the growth of many businesses, particularly micro enterprises, as the skill gap could not let them keep pace with changing times," he said.
Industry sources told TOI that the recent law mandating payments to MSMEs within 45 days also led them to lose order volumes from larger counterparts. Increased logistics costs and shrinking order volumes added to the crisis. Experts urge for targeted policies, easier credit access, and subsidised logistics support to breathe life back into the sector.