Tamil Nadu MSMEs Restructure Operations to Navigate West Asia Crisis

Following disruptions caused by the West Asia crisis, Micro, Small, and Medium Enterprises (MSMEs) in T Nagar and across Chennai are actively seeking ways to adapt their operations to survive ongoing economic turmoil. Industry leaders are drawing on lessons from past disruptions to navigate the latest bout of geopolitical volatility, which has spiked raw material costs and disrupted supply chains.

The conflict in West Asia has dealt a severe blow to Tamil Nadu's extensive MSME ecosystem, which spans sectors such as leather products, engineering goods, automobiles, castings, electronics, and garments. Local businesses are facing sharp price increases for key raw materials like copper and aluminium, alongside rising inventory costs that have inflated working capital requirements.

Logistics and supply chains have also been severely disrupted. MSMEs are currently dealing with higher freight charges, shipment delays, fuel price volatility, and shortages of liquefied petroleum gas (LPG), compounding the operational challenges for manufacturers.

To counter these challenges, industry bodies are proposing major structural expansions. Raja M Shanmugam, former president of the Tirupur Exporters Association and a non-official member of the government of India's Board of Trade, stated that the crisis presents an opportunity for growth. He proposed establishing a second industrial cluster in Tirupur—a replica of the existing garment hub—requiring an investment of approximately Rs 10,000 crore, primarily for housing infrastructure.

Tirupur currently accounts for roughly 65 percent of India’s knitwear exports. Its domestic production has grown from Rs 3,000 crore in the 2011 fiscal year to Rs 40,000 crore in the 2026 fiscal year, matching its export value. Shanmugam noted that with state government facilitation, production could potentially rise to Rs 2 lakh crore.

Additionally, Yavar Dhala, vice-president of the Indian Shoe Federation, urged the Tamil Nadu government to focus on attracting overseas investors. This comes as Asian footwear manufacturers revive plans for non-leather footwear factories in India following a reduction in US reciprocal tariffs on Indian goods. Tamil Nadu currently accounts for 40 to 45 percent of India's leather products and non-leather footwear exports, which reached $4.7 billion in the 2026 fiscal year.