MSMEs Will Retain Steady Growth Amidst Global Uncertainties: SIDBI While 80 per cent of MSMEs report having access to finance, the adequacy of this credit remains a sticking point. Approximately 40 per cent in both manufacturing and services say available funding falls short of their needs

India's Micro, Small and Medium Enterprises (MSMEs) are displaying a blend of cautious optimism and resilience as they navigate a complex economic landscape. The MSME Outlook Survey Edition 2 by SIDBI, paints a subtle picture of recovery and forward-looking confidence across the MSME spectrum.

For the final quarter of FY25 (January–March), the composite MSME business confidence index (M-BCI) stands at 60.82, a modest but meaningful rise from 58.30 in the previous quarter. This uptick reflects stable business sentiment across manufacturing (61.92) and services (62.40), though trading lags slightly behind at 55.79.

Looking ahead, the MSME business expectation index (M-BEI) continues to signal optimism with all sectors scoring above 54. While enthusiasm remains, it is tempered compared to previous surveys. The M-BEI for Q3 FY26 has dipped to 58.65 from 69.94 in the prior survey, indicating that global uncertainties, particularly tariff disruptions, are casting a shadow over long-term planning. Still, both manufacturing and services expect a strong Q4 FY26 with M-BEIs of 62.48 and 61.74, respectively.

Manoj Mittal, chairman & MD, SIDBI stated, "The Quarterly Outlook Survey is another initiative to 'understand MSMEs' in a better manner. During a time of increased global uncertainties fuelled by unprecedented tariff barriers, MSMEs have shown remarkable resilience and pro-growth sentiments. Their plans for CAPEX, employment and adoption of sustainable and green technologies augur well for our economy. I believe that with necessary support from all the stakeholders, Indian MSMEs will remain steady on their growth track amidst the cloudy external environment."

Sales growth is a standout area of confidence. Across sectors, MSMEs are buoyed by robust order books and rising selling prices. More than half of the manufacturing and services respondents anticipate continued sales growth over the next year, reinforcing the sector's underlying momentum.

Despite rising input costs, profitability remains largely intact. A notable 90 per cent of MSMEs surveyed believe they will either maintain or improve margins in the current quarter. The survey also points to encouraging trends in employment. One-third of manufacturing and services respondents report job growth, while around 40 per cent foresee increased hiring by Q4 FY26. Trading MSMEs are slightly more reserved, with only a quarter noting employment expansion.

However, challenges persist. A hefty proportion, around one-sixth, expressed dissatisfaction with the availability of skilled labour. This bottleneck is equally felt across manufacturing and services, suggesting a broader structural issue in workforce readiness.

Capital investment trends are positive. About 37 per cent of MSMEs in manufacturing and services have already expanded capacity, with a similar share planning additional investments a year from now. Sustainability efforts are also gaining traction. Roughly 40 per cent of respondents have taken steps toward environmentally conscious operations, such as installing solar panels and adopting cleaner technologies. The same percentage plans further sustainability-related investments in the coming year, indicating a maturing outlook on environmental responsibility.

Credit access remains a double-edged sword. While 80 per cent of MSMEs report having access to finance, the adequacy of this credit remains a sticking point. Approximately 40 per cent in both manufacturing and services say available funding falls short of their needs. Around 40 per cent of respondents across sectors report an increase in finance costs, and many anticipate elevated rates to persist despite expectations of an RBI rate cut.

Santanu Agarwal, deputy MD, Paisalo Digital Limited, highlighted the need for a more inclusive and flexible lending framework. "While it is encouraging to see that 80 per cent of MSMEs report access to credit, the persistent gap in adequacy underscores the need for a more tailored and inclusive lending framework," he said, advocating for a shift toward cash-flow-based assessments and co-lending models. "Partnerships between traditional banks and agile NBFCs can significantly expand the reach and customization of credit offerings. Such collaborative models can improve lending services experience, underwriting efficiency, and shared risk management in order to tap into a larger borrower base and contribute to a more inclusive financial ecosystem," he concluded.