MSME Capacity Utilisation Improved in Q1 FY26: SIDBI Survey

The Small Industries Development Bank of India (SIDBI) released the third edition of its “MSME Outlook Survey”, revealing a positive trend in capacity utilisation among Micro, Small, and Medium Enterprises (MSMEs) during the first quarter of FY2025–26.

Key Highlights:

Business Sentiment and Confidence Index

• Composite MSME Business Confidence Index (M-BCI): Rose to 63.75 in Q1 FY26 from 60.82 in the previous quarter.
  • Index >50 indicates positive sentiment.
• MSME Business Expectations Index (M-BEI):
  • 62.19 for July–September 2025
  • 67.88 for Q1 FY27
  • Indicates continued optimism despite global trade challenges.

Sectoral Trends

• Manufacturing and Trading MSMEs led confidence gains.
• Services sector remained stable, with a slight dip in optimism.

Capacity Utilisation

• Around 21% of manufacturing and 20% of services MSMEs reported above-normal capacity utilisation.
• Up from 12–14% in the previous quarter, showing a sharp uptick in operational activity.

Access to Finance

• 88% of respondents reported improved access to finance, compared to 79% previously.
• Indicates improved credit availability and financial conditions.

Sales and Profitability

• Over 50% of MSMEs experienced a rise in sales and profits.
• Profit margins improved despite persistent cost pressures.

Borrowing Costs and Monetary Policy Transmission

• Fewer MSMEs reported rising borrowing costs.
• Suggests early signs of transmission from the 100 bps repo rate cut by RBI since February 2025.

Export Concerns

• 40% of exporting MSMEs reported adverse impacts from tariff-related uncertainties.
• Highlights global trade tensions as a significant headwind.

About the Survey

• Conducted by: Small Industries Development Bank of India (SIDBI)
• Edition: Third
• Sample Size: 1,200 MSMEs
• Scope: Manufacturing, Services, and Trading sectors
• Purpose: Track business sentiment and operational trends in the MSME segment.

BS