Where Small Businesses Thrive in India: A State-by-State Look at Numbers, Earnings and Pay

India’s small businesses are spread unevenly across the country, and so are their earnings. A tailoring unit in rural Odisha and a design studio in Hyderabad are both small businesses, but they operate in very different markets. Knowing how your state compares helps you set realistic expectations for prices, pay and growth.

This article uses MoSPI’s Annual Survey of Unincorporated Sector Enterprises. The state tables come from the ASUSE 2023-24 full report (October 2023 to September 2024), the latest with detailed state figures by sector. The national headline figures for 2025 come from the ASUSE 2025 factsheet and press notes. All figures cover unincorporated, non-farm businesses (proprietorships, partnerships and similar firms), not companies, construction or agriculture.

Key points

• Uttar Pradesh, West Bengal and Maharashtra have the most small businesses, with more than a third of the sector’s workforce between them.
• The states with the most businesses aren’t the ones where businesses earn most. Gujarat, Maharashtra, Telangana, Kerala and Rajasthan lead on value added per business.
• Urban businesses earn about twice as much as rural ones nationally, and the gap is wider in some states.
• Pay for hired workers varies by more than two times between states, from under ₹1 lakh a year to over ₹2 lakh in small services businesses.

The 15 states with the most small businesses

Establishment counts are for manufacturing, trade and services combined. Value added is what a business produces minus what it spends on materials and other inputs, before paying workers and the owner: a rough guide to the income it generates. National averages in 2023-24 were ₹2,73,778 per trading business and ₹2,62,352 per services business.

Which states lead each sector?

Manufacturing: West Bengal has the most small manufacturing units, with 16.0% of the national total, followed by Uttar Pradesh (11.8%), Maharashtra (7.7%), Gujarat (7.2%) and Tamil Nadu (6.9%). Many are home-based tailoring, garment and food units. West Bengal’s manufacturing units are numerous but small, averaging ₹98,467 of value added, against ₹2,95,149 in Gujarat and ₹2,66,286 in Tamil Nadu.

Trade: Uttar Pradesh leads with 15.2% of India’s small trading businesses, followed by Maharashtra (9.8%), West Bengal (9.0%), Bihar (6.4%) and Madhya Pradesh (6.3%). The highest value added per trading business among larger samples was in Kerala (₹4,50,414), Delhi (₹4,15,910), Telangana (₹3,89,627), Haryana (₹3,85,154) and Tamil Nadu (₹3,79,223).

Services: West Bengal (13.1%), Uttar Pradesh (11.6%) and Maharashtra (8.8%) have the most services businesses, followed by Tamil Nadu (6.2%) and Gujarat (6.0%). Gujarat’s services businesses had the highest value added among the large states, at ₹4,56,136, followed by Maharashtra (₹3,92,603), Telangana (₹3,73,794) and Rajasthan (₹3,53,169).

Why such big differences?

Several things explain the gaps:

• Urbanisation. Nationally, urban establishments added ₹3,49,317 of value in 2025 against ₹1,68,730 in rural areas. States with larger, richer cities lift the average.
• Customer spending. Businesses selling to higher-income customers can charge more. That’s why the same service can earn very different amounts in different states.
• Business mix. States with many home-based tailoring or craft units have lower averages than states where small businesses are more often shops, workshops or professional services.
• Scale. Businesses with hired workers earn several times more than one-person businesses in every activity. States with more businesses that employ staff have higher averages.

Pay for hired workers by state

Average annual pay per hired worker in small services businesses (2023-24) also varies widely:

• Higher: Gujarat ₹2,01,831, Telangana ₹1,93,977, Punjab ₹1,87,424, Kerala ₹1,73,704, Maharashtra ₹1,63,274, Rajasthan ₹1,62,402.
• Middle: Andhra Pradesh ₹1,59,269, Karnataka ₹1,58,900, Tamil Nadu ₹1,45,606.
• Lower: Uttar Pradesh ₹1,12,327, Madhya Pradesh ₹1,05,409, West Bengal ₹1,02,165, Bihar ₹99,665, Jharkhand ₹93,872, Odisha ₹84,906.

These figures include employer contributions such as PF and ESI where they apply. Pay rose nationally to ₹1,46,550 a year in 2025, up 3.88%. Use them as a starting point, then check local rates and your state’s minimum wages before hiring. Advanton’s hiring cost calculator shows the full cost of an employee, including PF, ESI, gratuity and bonus.

Choosing a location: how to use state data

If you’re deciding where to open or expand, the state averages are only a starting point. Work through these questions for each location you’re considering:

1. How many similar businesses are already there? Browse the area on Google Maps and in the India Business Directory by state, city and category. A crowded market isn’t always bad, since it shows demand, but you’ll need a clear reason for customers to choose you.
2. What do customers pay? Check the prices of three to five competitors. They tell you more about local spending than any state average.
3. What will rent and wages cost? In higher-earning states and cities, both are usually higher. Compare your expected value added with these costs, not with the average alone.
4. Is it urban or rural? The urban-rural gap is often bigger than the gap between states. A business in a growing town near a city can sometimes combine lower costs with good demand.
5. Can you reach customers beyond your area? If you can sell online or travel to customers, your local market matters less.

Advanton’s business idea reality check brings these together: choose your business, state and whether you’ll be urban or rural, enter your rent, staff and prices, and see a 36-month projection with your break-even month.

State rules that differ

Running a business also works differently from state to state. Before you start, check:

• Shops and establishments registration. Each state has its own law, fees and thresholds. Some only need an online intimation for small businesses without employees. See our guide to shop and establishment registration and trade licences.
• Professional tax. Many states charge it, up to ₹2,500 a year per person, while others, such as Delhi, don’t.
• Minimum wages. States set minimum wages by type of work and skill level, and revise them regularly.
• Trade licences. Your municipal corporation or council decides which businesses need one and what it costs.
• State schemes. Most states run their own subsidies and loan schemes for small businesses, women entrepreneurs and particular industries. Your District Industries Centre (DIC) is the best place to ask.
• GST. GST is national, but your GSTIN starts with your state’s code, and selling to customers in other states is taxed differently. Our GST invoice guide explains CGST, SGST and IGST.

What this means for your business

Price for your local market, not the national average. If you’re in a state or city where small businesses earn more, customers are likely to pay more too. If you’re in a lower-earning area, keep costs lean and look for ways to reach customers further away, for example by selling online.

Use your state’s figures to test your plan. Advanton’s business idea reality check lets you choose your state, then compares your projected value added with the typical small business in your sector there, urban or rural.

Look beyond your state for customers. Many of the highest-earning small businesses sell to customers in other cities or abroad: crafts, designs, software, coaching and consulting. Online marketplaces, ONDC, WhatsApp and your own website make that easier than ever.

Be found where you are. Whatever your state, most customers search locally. List your business free in the India Business Directory, which has pages for every state, city and category, so customers searching in your area can find you.

Notes on the data

• The state tables are from ASUSE 2023-24, the latest full report with state detail. The 2025 survey shows national growth of 7.97% in establishments and 10.87% in value added since then, so current figures will be higher in most states.
• Smaller states and union territories have smaller samples. Goa and Chandigarh, for example, show very high value added per services business (₹8,14,481 and ₹8,02,569), but these averages rest on fewer surveyed businesses, so treat them with more caution.
• ASUSE doesn’t cover registered companies, construction or farming, so states with many larger firms or construction activity have more business activity than these figures show.

Frequently asked questions

Is it better to start a business in a big city?
Not necessarily. Cities have more customers and higher prices, but also higher rents and wages and more competition. A growing town near a city can be a good balance. Compare local demand and costs, not just state averages.

Which state has the most small businesses in India?
Uttar Pradesh, with 93.8 lakh establishments in 2023-24 (12.8% of India’s total), closely followed by West Bengal with 92.7 lakh.

Where do small businesses earn the most?
Among large states, Gujarat, Maharashtra, Telangana, Rajasthan and Kerala lead on value added per business in services and trade.

Does starting in a high-earning state guarantee higher income?
No. Costs such as rent and wages are usually higher there too, and competition can be stronger. Compare both sides before deciding.

Why does West Bengal have so many businesses but lower averages?
It has a very large number of small home-based units, especially in manufacturing and services, which pulls the average down even though the total number of businesses is high.

How often is this data updated?
MoSPI now runs ASUSE every year, with quarterly bulletins. State detail comes with each full report.

Where can I see small businesses in my state?
Browse the India Business Directory by state, city and category, and list your business free.

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Sources

1. MoSPI, Annual Survey of Unincorporated Sector Enterprises 2023-24, full report
2. MoSPI, ASUSE 2025 factsheet (January to December 2025)
3. MoSPI, Press note on the ASUSE 2025 detailed report (6 May 2026)

Last reviewed November 7, 2026. Startup costs are estimates; check local prices, licensing and tax rules before you commit money.