SIDBI Outlook Survey on MSMEs

Context:

• The Small Industries Development Bank of India (SIDBI) released its fourth MSME Outlook Survey for July–September 2025 (Q2 FY26). The survey assesses the performance and confidence levels of India’s micro, small, and medium enterprises (MSMEs) through structured indicators.
• It uses two indices:
  • M-BCI (MSME Business Conditions Index)
  • M-BEI (MSME Business Expectations Index)
    Both indices range from 0 to 100; a value above 50 indicates optimism.

Key Findings

• The M-BCI fell slightly to 61.64 in Q2 FY26 from 63.75 in the previous quarter — showing a mild dip in business confidence, though still well above the 50-threshold.
• The M-BEI is expected to improve to 62.26 in the next quarter and 66.57 one year ahead (July-Sept 2026), supported by stronger domestic demand and policy measures such as GST rate cuts.
• Sales sentiment:
  • Manufacturing: 47% of firms reported positive growth.
  • Trading: 50% reported positive growth.
  • Exports: Only 43% saw growth now; 56% expect recovery.
• Costs and capacity:
  • Among manufacturing firms, the share facing higher finance costs fell from 41% to 33%.
  • Capacity utilisation: 25% of manufacturing firms were operating above normal capacity in the current quarter; expected to rise to 36% next year.
• Ease of Doing Business (EoDB) & compliance: Over 60% of MSMEs expect improvement in permits, compliance, and power supply in the next year.
• Challenges:
  • Awareness of Quality Control Orders (QCOs) remains low.
  • Service-sector firms continue to face credit access issues.

Significance

• MSMEs remain resilient despite slight moderation in confidence.
• Expectations of improved conditions reflect optimism about recovery and policy support.
• The findings highlight the need to strengthen exports, quality compliance, and credit access to sustain growth.