New Delhi: Business confidence among India’s micro, small, and medium enterprises (MSMEs) improved notably during the April–June quarter (Q1 FY26), backed by strong domestic demand and better access to finance, according to the latest MSME Outlook Survey released by the Small Industries Development Bank of India (SIDBI).
The survey, conducted in collaboration with the Academy of Management Studies, Lucknow, covered 1,200 MSMEs across 15 states and 45 districts.
Business Confidence and Outlook Strengthen
The Composite MSME Business Confidence Index (M‑BCI) rose to 63.75 in Q1 FY26, up from 60.82 in the previous quarter, indicating growing optimism. A value above 50 reflects positive business sentiment.
- Gains were led by manufacturing and trading MSMEs, while the services sector remained steady with a slight dip in sentiment.
- The Business Expectations Index (M‑BEI), which reflects future outlook, stood at 62.19 for July–September and 67.88 for the first quarter of FY27, suggesting continued optimism despite global trade and tariff uncertainties.
Improved Access to Finance, Lower Borrowing Costs
- 88% of MSMEs reported improved access to finance, compared to 79% in the previous quarter.
- A notable reduction in reported borrowing costs indicates early transmission of the 100 basis point repo rate cut by the RBI since February 2025.
Higher Sales and Profitability
- Over 50% of respondents across sectors saw an increase in sales and profitability during the quarter.
- Despite ongoing input cost pressures, profit margins improved, with positive expectations for the coming year.
Rising Capacity Utilization and Investment Intentions
- Around 21% of manufacturing and 20% of services sector MSMEs operated at above-normal capacity levels, a significant increase from 12–14% previously.
- This signals rising demand and improved operational efficiency.
- A growing number of MSMEs also indicated plans for capacity expansion and new investments, reflecting long-term confidence.
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Export Concerns Persist
- While domestic sentiment improved, 40% of exporters flagged tariff-related uncertainties as a concern, highlighting ongoing global trade headwinds.
The survey suggests a strengthening MSME sector marked by buoyant domestic demand, better financial access, and resilient margins. However, external challenges like global tariff issues and the need for continued financial support remain areas to watch.
SIDBI’s quarterly survey offers a critical pulse on MSME sentiment and helps guide policymakers in shaping responsive measures to support this vital segment of the Indian economy.
