Over 1.3 Lakh MSMEs Deregistered: NDA Strongholds Gujarat, Maharashtra Lead Figures as Small Units Face Pressure

More than 1.37 lakh micro, small, and medium enterprises (MSMEs) have deregistered from the government’s Udyam portal since July 2020, according to data tabled by the Ministry of MSME in Parliament. Major industrial hubs governed by the National Democratic Alliance (NDA)—led by Maharashtra, Gujarat, and Rajasthan—account for a dominant share of these cancellations, shedding light on the ongoing operational stress within India’s core manufacturing belts.

While headline numbers have drawn attention to the state of small businesses, official data indicates that roughly half of all deregistrations stem from actual permanent business closures, with the rest driven by administrative restructuring and duplicate filings.

Maharashtra and Gujarat Top National Figures

The parliamentary breakdown shows that the highest concentration of cancellations sits squarely in major industrial states with dense MSME networks.

NDA-governed states make up four of the top five slots:

• Maharashtra: Leads the country with 9,702 cancellations in the 2024–25 financial year alone and cumulative deregistrations topping 15,220 since July 2020.

• Gujarat: Ranks third nationwide, registering 3,534 closures in FY 2024–25 and a total of 5,974 units deregistering since the platform went live. Local industry bodies point to persistent margin pressures in the state's textile, chemical, and ceramic clusters.
• Rajasthan: Ranks fourth nationally, recording 3,274 closures in FY 2024–25 and cumulative deregistrations reaching 4,800 units.
• Karnataka: Ranks fifth, logging 2,187 cancellations in the last financial year.

Among non-NDA states, Tamil Nadu recorded the second-highest figures overall, with 4,900 deregistrations in FY 2024–25 and over 7,800 since 2020.

Ground Reality in Gujarat's Industrial Belts

Industrial representatives across Gujarat note that while the state continues to attract large capital investments, micro-enterprises in hubs like Ahmedabad, Surat, Rajkot, and Morbi have navigated severe cost headwinds over the past four years.

Volatile raw material prices, elevated freight costs, and stretched working capital cycles have squeezed smaller suppliers. While government credit guarantee initiatives have provided liquidity to formal units, many smaller micro-enterprises struggling with cash flows ultimately halted operations or opted out of formal channels.

Paper Cancellations vs Actual Business Shutdowns

The Ministry of MSME clarified in Parliament that cancellation of an Udyam registration does not always indicate a commercial failure.

Data tracking specific reasons for cancellation shows that permanent business shutdowns account for roughly 45% to 50% of all deregistrations—translating to approximately 60,000 to 68,000 units nationwide. The remaining cancellations occur due to:

• Ownership Restructuring: Businesses changing legal status from sole proprietorships to partnerships or private limited entities, requiring a fresh registration.
• Duplicate Entries: Redundant entries created during initial portal onboarding using secondary phone numbers or Aadhaar details.
• Turnover Thresholds: Units exceeding MSME caps or voluntarily surrendering certificates after availing specific government schemes.

Across India, actual permanent closures represent less than 0.09% of the 7.83 crore total enterprises registered on the Udyam platform since 2020.

Employment Impact and Legislative Response

Data submitted in Parliament estimates that roughly 8.64 lakh jobs were linked to the ~1.37 lakh deregistered units at the time of cancellation. Year-on-year figures show an upward trend in reported deregistrations as portal auditing expanded—moving from 175 in FY 2020–21 to over 39,000 in FY 2024–25.

To cushion small units in key hubs like Gujarat and Maharashtra against chronic cash bottlenecks, the central government is pushing reform measures under the MSME Development (Amendment) Bill, focusing on enforcing payment deadlines for larger buyers and expanding digital dispute resolution through the MSME Samadhaan portal.