The System is Failing MSMEs

How a Foreign Tariff Shock Exposed a Deeper Domestic Crisis

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With 28 crore Indians earning a livelihood from over 6.8 crore MSMEs-contributing 30% of India's GDP, 35.4% of manufacturing, and 45.7% of all exports-the tremors that ran through workshops, salons, coaching centres, kirana-linked traders, and small factories after the 2025 US tariff hike felt less like geopolitics and more like a punch to the gut.

A salon in Patiala lost footfall after a hosiery unit cut shifts. A tailoring shop in Bathinda delayed wages. A dhaba outside Khanna's industrial belt served fewer truckers. A home-based pickle maker in Moga stared at unsold jars. These stories made something painfully clear: the tariff was never the main story. It simply illuminated cracks that had been widening quietly for years.

With such an enormous footprint, this sector should have been resilient. If a single foreign tariff can shake an ecosystem employing almost a fifth of the country, then something deep inside is already weak. The shock from abroad only exposed the instability that was already building at home. And for 85% of MSMEs, which serve only Indian customers, this was never an exporter's crisis. India’s MSMEs are not just factory floors; they are salons, restaurants, repair shops, coaching centres, micro clinics, logistics operators, wholesalers, digital freelancers, small traders, and lakhs of home-based women-led ventures. Their struggle predates any tariff.

Rising input and power costs, GST complexity, rental inflation, platform commissions, poor local demand, and thinning margins are realities they face every week-in their own mohallas and markets, not in foreign trade lanes.