SIDBI Releases Q2 MSME Outlook Survey 2025

The Small Industries Development Bank of India (SIDBI) has released the fourth edition of its “MSME Outlook Survey,” a quarterly publication that provides key insights into the business sentiment among Indian Micro, Small, and Medium Enterprises (MSMEs). This comprehensive pan-India survey captures the perspectives of MSMEs operating across manufacturing, services, and trading sectors and aims to bridge critical data gaps through a lead as well as a lag indicator — the MSME Business Expectations Index (M-BEI) and MSME Business Conditions Index (M-BCI).

These indices, which range from 0 to 100, reflect MSME sentiment, with values above 50 indicating a positive outlook. The M-BCI and M-BEI are derived from six key parameters: sales, profit margins, availability of skilled labour, access to working capital and overall finance, and the overall business situation. The survey also covers capacity utilisation, capital expenditure, interest cost trends, and ease of doing business. The current round is based on inputs from a representative sample of 1,200 MSMEs across different regions and industries.

The composite M-BCI for July-September 2025 quarter declined to 61.64 from 63.75 in the previous quarter, indicating a modest dip in confidence. Sector-wise, manufacturing and services maintained steady optimism, while trading showed more volatility.

The composite M-BEI projects a positive outlook, with the composite index expected to rise to 62.26 in the next quarter and further to 66.57 in the quarter one-year ahead (July-September, 2026). This reflects MSMEs’ anticipation of improved market conditions, driven by stronger domestic demand and supportive policies such as the cut in GST on a wide range of products and services. The services sector, in particular, shows robust expectations for future growth.

Sales sentiment softened modestly in Jul-Sep 2025, with 50% of trading and 47% of manufacturing MSMEs noting positive growth, down from the previous quarter. The services sector maintained its earlier momentum. Looking ahead, revenue expectations remain upbeat, bolstered by the festive season. Although positive growth in export sales dipped to 43%, exporters anticipate a strong rebound, with 56% expecting healthy growth next year.

Cost pressures eased in manufacturing and trading, aligning with low wholesale inflation; the services sector saw stable input costs. Nonetheless, many MSMEs expect cost challenges to persist.

Most businesses continue to show resilience, with the majority experiencing stable profit margins, and nearly one in five even reporting improvements. While a small portion (15%-20%) saw some pressure on profits, overall optimism remains high. Looking ahead, expectations for the next year are bright, especially in the manufacturing and services sectors, where positive momentum is expected to continue.

There are signs of easing of interest burden of MSMEs, particularly in manufacturing, where the share of those reporting increase in cost of finance / interest rates fell from 41% to 33%. However, expectations of elevated finance costs persist across sectors, reflecting cautious sentiment about future interest rate trends.

MSME credit availability shows mixed results. In manufacturing, more firms (92%, up from 88%) say credit is available, but many find it inadequate. In services, more MSMEs (19%, up from 13%) report difficulty in getting finance. Manufacturing MSMEs remain hopeful for better credit access due to supportive policies.

There is an improvement in skilled labour availability, with optimism rising significantly across all sectors from the first round to the latest round of the survey. However, the positive responses for the future quarters fall back to level that of the previous quarter, indicating a consistent inadequacy of skilled labours.

MSME capacity utilisation is steadily improving. In manufacturing, firms with above-normal utilisation increased from 21% to 25% and is expected to reach 36% next year. Services show a similar rise, with expectations going from 20% to 30%. Many firms are adding capacity: 42% in manufacturing and 35% in services this quarter, with even more planning to do so next year. This shows confidence in future demand.

Respondents in the Services and Trading sector expect a better debtor realization period in the future. The positive responses indicating the outlook, though better than the current quarter, remains below that of the Apr-Jun 25 period, indicating a persistent challenge in debtor realization in manufacturing sector. The share of respondents indicating improvements in the debtor realization timelines declined as compared to the previous round for all three sectors. Nevertheless, future expectations are positive, with more firms anticipating improved timelines.

Ease of Doing Business (EoDB) indicators show improvement across parameters such as permits, electricity supply, compliance, and overall business environment. Optimism in the general outlook towards EoDB is high in one-year-ahead expectations across sectors with over 60% of respondents in each sector expecting further improvements. 

The survey has also assessed the Quality Control Orders (QCO) impact across MSME sectors. The findings suggest that the QCO framework has an impact on a certain section of MSMEs particularly in trading and manufacturing in terms of costs and time taken for such compliances. The survey also highlights that there remains a gap in awareness about the QCO norms and interventions are necessary in this regard.