MSMEs are an important tool in shaping the Indian economy generating GDP, employment opportunities, and export activities. In India, Tamil Nadu is one of the foremost industrial states, and also MSME sector integral to the region's economic development. It contributes to GDP, employment generate, and export activities. Tamil Nadu is one of India's foremost industrial states, and houses a thriving MSME sector integral to the region’s economic advancement. Despite their critical contributions, these enterprises encounter multiple obstacles, like as very limited access to affordable financing, regulatory complexities, inadequate infrastructure, and slow technological adoption. The economic difficulties were further intensified by the COVID19 pandemic, which disrupted operations, supply chains, and market connectivity. In the face of such hurdles, MSMEs in Tamil Nadu and across India hold immense growth potential.Programs like Make in India and Atmanirbhar Bharat, along with Tamil Nadu’s supportive industrial policies, create a favorable environment for fostering entrepreneurship, innovation, and skill development. The advent of digitalization and e-commerce platforms has paved the way for these enterprises to expand their markets and modernize their operations, boosting their competitiveness. Moreover, Tamil Nadu’s advanced industrial ecosystem and skilled labor force enhance MSMEs' ability to more effectively. The economic challenges and growth prospects for MSMEs highlight their essential for India's and Tamil Nadu's economic development. It emphasizes implementing financial, and structural issues, promoting sustainable development, improving technological capabilities, and ensuring that MSMEs become the cornerstone of inclusive and sustainable economic progress.