• Tamil Nadu houses over 35.3 lakh registered MSMEs, employing more than 1.1 crore individuals.
• MSMEs span across diverse sectors—textiles, leather, food processing, electronics, and engineering—with clusters in Tirupur, Ranipet, Coimbatore, and beyond.
• Credit support is strong, with Tamil Nadu topping PMMY disbursements at ₹3.23 lakh crore, and 43% of MSME loans directed to manufacturing.
• Government-led initiatives like SIDCO estates and 100 NABL food labs are improving infrastructure and export-readiness for MSMEs.
• With strong credit outreach, supportive policy, and emerging sectoral opportunities, Tamil Nadu’s MSME ecosystem is well-positioned to scale further

Tamil Nadu stands as India’s most industrialized state, housing over 16% of the country’s total factories, which is the highest among all states. The state contributes approximately 12% to the country’s manufacturing GDP, and makes up 10% of its total exports, at approximately USD 30.50 billion annually. The state is also home to more than 35.3 lakh Udyam-registered MSMEs, placing it third in India by volume. Of these MSMEs, microenterprises make up 94% of the total share, followed by small, and medium enterprises. 

These small businesses account for nearly 15% of India’s total MSMEs, collectively provide employment to over 1.1 crore people, and produce more than 8,000 different products, ranging from pharmaceuticals to dairy, textiles to engineering components.

What sets Tamil Nadu’s MSME ecosystem apart is not just its scale, but also the breadth of its geographic and industrial spread. From the textile and granite of Salem to knitwear clusters of Tirupur, leather units of Ranipet, the agri-processing hubs of Thanjavur, and the precision engineering firms in Coimbatore, MSMEs are deeply embedded across both urban and rural belts. These districts, along with others such as Madurai, Erode, Vellore, and Dindigul, each support distinct manufacturing and service ecosystems, often rooted in local skills and resources. 

This wide distribution has created a resilient and decentralized network of enterprises that drive employment, exports, and supply chains across the state. Among these, Chennai tops the list with 3.76 lakh registered MSMEs, reflecting the city’s lead in knowledge services, electronics, and export logistics. Coimbatore follows with 2.59 lakh units, Salem has 1.77 lakhs, and Tirupur 1.68 lakhs, while Madurai, Thiruvallur, Erode, Kanchipuram, Tiruchirappalli, and Krishnagiri each record 0.99–1.47 lakh registrations, confirming that MSME activity is no longer confined to the traditional industrial corridors. 

This broad base of formalised enterprises illustrates both the success of outreach programmes—especially in Tier-2 and Tier-3 cities—and the resilience created by a truly decentralised network of small businesses.

Source: Micro, Small And Medium Enterprises Department, Policy Note 2025–2026

Sectoral Strengths Driving Tamil Nadu’s MSMEs

MSMEs contribute significantly to an array of industries that are closely tied to local demand, export potential, and availability of skilled labor. Here are the top industries:

1. Textile Industry: Salem-Tirupur-Erode-Karur belt is a global powerhouse for silkwear, knitwear and woven garments, with Tirupur alone accounting for over ₹25,000 crore in annual garment exports. MSMEs in this region manage the entire production chain, from spinning to stitching, increasingly adopting sustainable practices. 
2. Leather Sector: Tamil Nadu is the biggest leather exporter (40%) of the country, and its share in India’s output of leather products is 70%. Vellore and Ranipet have a rich heritage in processing and manufacturing, with a renewed focus on MSME-centric export development. 
3. Food processing & Agriculture: Tamil Nadu also exhibits strong potential in food processing, leveraging its robust agricultural base. For instance, the state tops India’s export of processed fruits, juices, and nuts, with a 33% share by quantity and 27% share by value. MSMEs are expanding into cold chain logistics, farm-to-market platforms, and value-added food products. 
4. Electronics & Technology: Tamil Nadu maintains a leading position with 41.2% of India’s total electronics exports and recorded its highest-ever numbers in FY25, reaching $14.65 billion, a 53% increase over the previous year. MSMEs are increasingly integrating into larger industrial ecosystems, especially along the Chennai corridor, which hosts major electronics manufacturers and auto companies. This creates significant vendor opportunities for smaller enterprises. 
5. Engineering & Auto Components: The state leads with 35% share in auto component manufacturing in the country. This segment remains a cornerstone of the state’s MSME strength. Clusters in Coimbatore and Hosur specialize in manufacturing machinery, pumps, motors, and castings, with many units embracing automation and digital tools to modernize their production systems. 

Beyond the flagship clusters of textiles, leather, engineering, and electronics, Tamil Nadu’s MSMEs have also established strong niches in pharmaceuticals, solar energy equipment, gold and diamond jewelry, pollution control systems, sports goods, cost-effective building materials, food processing, plastics, and rubber. This broad industrial footprint enlarges the state’s export basket, anchors thousands of ancillary suppliers, and cushions the economy against sector-specific slowdowns.

While these varied sector strengths provide the foundation for Tamil Nadu’s growth story, the state’s infrastructure and industrial policies are making it even easier for MSMEs to start, expand, or relocate.

Infrastructure and Policy Support Enabling Growth

The Small Industries Development Corporation (SIDCO) is at the forefront of enhancing industrial infrastructure across the state. A significant plan involves a ₹366 crore allocation for nine new industrial estates across the state. These estates are being developed with a clear focus on plug-and-play facilities—ready-to-use spaces equipped with essential utilities, including roads, power, water, and waste management. This model directly addresses a major hurdle faced by MSMEs: the high upfront costs and operational delays linked to land acquisition, construction, and setup. For businesses in Tier 2 and Tier 3 regions, these estates significantly reduce financial risk, lower entry barriers, and enable quicker commencement of operations. By freeing up capital that can instead be directed toward production, technology, or hiring, this strategic infrastructure push encourages faster formalization, accelerates business establishment, and paves the way for more resilient and regionally distributed industrial growth. 

Food Safety and Irradiation Units

To bolster the food processing and export industries, the government is providing significant support for enhancing food quality and safety infrastructure. This includes plans for establishing 50 multi-product food irradiation units for MSMEs, which are crucial for extending shelf life and ensuring product safety. Additionally, there is a strong emphasis on setting up 100 National Accreditation Board for Testing and Calibration Laboratories (NABL)-accredited food quality and safety testing labs, as announced during the Union Budget 2024 session. These labs are vital for ensuring that food products meet stringent national and international quality standards, thereby boosting the state’s food exports and enhancing consumer confidence. They directly address key challenges in food preservation, quality control, and compliance with international food safety standards. 

The forward-looking policy support helps MSMEs overcome non-tariff barriers to trade, enabling them to compete effectively on a global scale and contribute significantly to India’s overall export targets, thereby creating new avenues for growth and prosperity.  

Sectoral Support for Leather Clusters

Recognizing the export potential of its traditional leather industry, the government is prioritizing MSME financing in leather manufacturing, particularly in the Vellore and Ranipet clusters. This targeted support aims to strengthen various segments of the leather value chain, including tanning, finishing, and the production of value-added leather goods. The Footwear and Leather Products Policy 2022 specifically targets attracting investments and creating jobs in this segment, emphasizing the development of footwear clusters and design studios. This focus ensures that MSMEs can upgrade their technology and processes to meet global standards and cater to higher-end markets.  

Tech-Focused Upgrades

Tamil Nadu is strategically positioning itself to be a key contributor to India’s rapidly expanding drone market, which is projected to reach $11 billion by 2030. This presents a significant opportunity for MSMEs to integrate into the drone ecosystem, contributing through the manufacturing of electronics, components, software, and allied services. The state’s existing expertise in auto, aerospace, and electronics manufacturing, coupled with vibrant research from institutions like MIT and IIT-M, provides a strong foundation for this growth. Government policies are actively ramping up infrastructure support for this sector, encouraging MSME participation in this high-tech domain.

How Credit Is Powering Tamil Nadu’s MSMEs

A primary reason why Tamil Nadu’s MSME sector continues to grow steadily is its strong access to credit. As of February 2025, the state ranked number one in loan disbursements under the Pradhan Mantri Mudra Yojana (PMMY), with disbursals exceeding ₹3.23 lakh crore. This high figure reflects strong outreach and demand for credit and proves that even micro-enterprises in Tier-2 and Tier-3 regions are becoming part of formal banking systems.

Further, 43% of all MSME loans in Tamil Nadu are directed to manufacturing, a much higher share than the national average, and private banks lead the charge, holding about 39% of the MSME lending market.

Benefiting the state is the fact that credit access is more wide-reaching and not concentrated in selective pockets. For instance, 

• Coimbatore exhibits robust credit activity, with 48% of lending directed to the manufacturing sector
• Chennai sees 31% of credit flowing to manufacturing and 26% toward long-term capital
• Tirupur has 75% of MSME lending focused on manufacturing
• Madurai trade leads at 36%. 

Sarvanan Power Looms of Salem offers a solid example of what the right credit product can do for a microenterprise. In 2021, the family-run unit, operating with just two handlooms and turned away by local banks, secured a Loan Against Property (LAP) from Protium, pledging its modest factory shed and land. The funds paid for 19 additional looms, a power upgrade, and a small warehouse, immediately lifting output and margins. When demand for pure silk surged, Protium stepped in again with a top-up LAP in 2023, taking the total installation to 38 power looms and financing a flagship retail outlet, Mathan Textiles. The business now turns over ₹15–20 lakh a month (≈₹2.4 crore a year) and supplies wholesalers across Tamil Nadu, proving how a single, well-structured LAP can convert collateral into capacity, market reach, and sustainable MSME growth.

The Need for Diversified Credit Products

Financial Institutions and RBI-registered NBFCs have introduced several products. For instance, Protium, which operates in cities such as Chennai, Coimbatore, Madurai, and Salem, offers MSME-focused credit products, including Machinery Financing and Loan Against Property. These can be leveraged by local MSMEs for growth and expansion. Access to these prompt, tailored loan options can enable Tamil Nadu MSMEs to focus on the growth opportunities outlined below:

1. Export orientation: From garments to food products and leather goods, Tamil Nadu’s small businesses are finding markets outside India. With global demand growing for sustainable and certified products, MSMEs that meet these requirements will have a clear advantage.
2. Alignment with National Targets like “Make in India,” “Viksit Bharat 2047,” and the ₹11 billion drone manufacturing goal. This creates space for new MSME entrants in electronics, engineering, and tech services.
3. Growth: Tamil Nadu’s high penetration of credit allows more MSMEs to invest in expansion, buy better machinery, or hire skilled workers. 

Infrastructure upgrades—including the upcoming industrial estates—will bring more semi-urban and rural areas into the MSME fold, creating new jobs and local supply chains.