SIDBI Survey Shows India’s MSMEs Holding Ground with Optimism

At a time when global markets continue to shift and domestic businesses navigate cost pressures and policy transitions, India’s MSME sector appears to be standing firm.

The fifth edition of the SIDBI MSME Outlook Survey paints a picture of steady confidence and forward-looking optimism among micro, small and medium enterprises (MSMEs) across manufacturing, services and trading. Released by the Small Industries Development Bank of India (SIDBI), the quarterly survey tracks sentiment through two key metrics — the MSME Business Conditions Index (M-BCI), which captures current business performance, and the MSME Business Expectations Index (M-BEI), which reflects future outlook. Any index reading above 50 signals expansionary sentiment.

And by that measure, India’s MSMEs are clearly in expansion mode.

SIDBI’s fifth MSME Outlook Survey

Confidence Remains Stable, Manufacturing Leads the Way

For the October–December 2025 quarter, the composite M-BCI stood at 60.8 — only slightly lower than the previous quarter’s 61.6 — indicating broadly stable business conditions.

What stands out, however, is the performance of the manufacturing sector. Its M-BCI rose to 64.1, reflecting stronger operational momentum and improved business sentiment. The data suggests that manufacturing enterprises are experiencing firmer demand and better business traction.

On the other hand, sentiment in the services and trading sectors moderated slightly during the quarter, pointing to some near-term pressures. While not alarming, the softening indicates that certain segments may be facing cost constraints or demand variability.

Growth Expectations Turn Sharper

If current conditions reflect stability, the outlook ahead reflects confidence.

The composite M-BEI is projected to rise to 63.7 in the next quarter and further strengthen to 65.0 in the same quarter a year later (October–December 2026). These numbers suggest that MSMEs expect sustained expansion across sectors, underlining resilience and belief in continued economic activity.

This optimism is not limited to one segment — it is broad-based.

Sales Momentum Building, Especially in Manufacturing

Manufacturing enterprises reported stronger sales sentiment and higher expectations for future sales growth, supported by improving demand conditions.

While services and trading did not show significant gains in current sales sentiment, businesses across sectors remain optimistic about future sales. The broader narrative points toward resilient domestic demand and improving market conditions.

The underlying message is clear: even if some sectors are facing short-term moderation, the overall growth trajectory remains intact.

Access to Finance: A Clear Bright Spot

One of the most encouraging signals from the survey is the improvement in access to finance.

Optimism around working capital availability rose sharply in manufacturing, with 46% of respondents expressing positive sentiment — up from 35% in the previous quarter. Overall finance availability sentiment in manufacturing also improved to 47%.

Services enterprises reported marginal improvements, while trading businesses saw some moderation in working capital sentiment. However, confidence in overall finance availability strengthened considerably even in trading, indicating improved credit flows.

Improved access to working capital has long been a critical lever for MSME growth. This shift, therefore, adds structural strength to the sector’s outlook.

Profit Margins Under Pressure in Services and Trading

While most MSMEs reported stable margins overall, the survey flagged emerging concerns in services and trading.

The net response for profit margins in these sectors declined or turned negative compared to the previous quarter, signalling cost pressures. Rising input costs or competitive pricing could be factors weighing on profitability.

That said, the longer-term view remains optimistic. MSMEs — particularly in services — expect margins to improve over the next year, suggesting confidence in better cost management and revenue growth ahead.

Year-on-Year Improvement Backed by Policy Support

A year-on-year comparison of composite and sectoral M-BCI shows clear improvement in overall MSME sentiment.

This progress has been supported by a favourable domestic macroeconomic environment, supportive policy measures, and better access to credit. Working capital and overall finance availability showed the strongest improvements over the past year, while sales and overall business conditions also recorded gains.

Despite global uncertainties, the data suggests that domestic demand and stable operating conditions have helped buffer Indian MSMEs from external headwinds.

Exporters Leaning on Policy Support

Export-oriented MSMEs are also actively engaging with policy-backed financial measures.

The survey shows that 43% of respondents plan to avail RBI Trade Relief measures, 46% intend to adopt the Credit Guarantee Scheme for Exporters (CGSE), and nearly 37% expect to use both options.

This reflects growing awareness of institutional support and increasing reliance on structured financial mechanisms to strengthen export competitiveness.

Labour Codes and the Push Toward Formalisation

The survey also touched upon the impact of new labour codes on MSMEs. Around 34–36% of firms anticipate a short-term rise in compliance costs as they transition.

However, many respondents believe that the new framework could accelerate business formalisation and strengthen operational systems in the long run. Clearer guidance and capacity-building initiatives were highlighted as essential for smooth adoption.

If implemented effectively, the transition could drive productivity gains and stronger institutionalisation within the MSME ecosystem.

SIDBI’s Continuing Role

Established in 1990, SIDBI has played a central role in promoting and financing MSMEs across India. Through credit support, development initiatives and policy interventions, it has supported enterprises ranging from traditional small entrepreneurs to high-growth, knowledge-driven ventures.

The latest survey reinforces the sector’s critical role in driving economic growth, employment and entrepreneurship.

The overall message from the fifth edition of the SIDBI MSME Outlook Survey is clear: India’s MSMEs are steady, cautiously confident, and preparing for expansion.

With stable business conditions, improving credit access, policy-backed export support, and optimistic growth expectations, the sector appears well-positioned to continue powering India’s economic momentum.

In a landscape marked by both opportunity and uncertainty, India’s MSMEs seem to be choosing resilience — and growth.