SIDBI Releases Third Edition of MSME Outlook Survey for April–June 2025

The Small Industries Development Bank of India (SIDBI) has released the third 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 latest findings reveal that the Composite MSME Business Confidence Index (M-BCI) for the first quarter of FY2026 (April–June) rose to 63.75 from 60.82 in the previous quarter. This uptick reflects a favourable business environment for MSMEs, with manufacturing and trading sectors experiencing sharper improvements, while the services sector continues to maintain a strong confidence level above 60, indicating sustained optimism.

The outlook for the coming quarters remains promising. The Composite MSME Business Expectations Index (M-BEI) stands at 62.19 for the next quarter and rises to 67.88 for the corresponding quarter next year. Sentiments appear especially strong in the trading and services sectors, where the M-BEI for Q1FY2027 is recorded at 68.32 and 68.24 respectively. Although a moderate dip in expectation indices is observed for Q2FY2026, this likely reflects near-term global uncertainties, with long-term optimism firmly intact.

In terms of sales performance, more than half of the MSMEs in the manufacturing and trading sectors reported growth in Q1FY26. Within the services sector, 42% of MSMEs recorded sales growth, while another 48% reported stable sales. Year-on-year, MSMEs across all three sectors indicated consistent sales growth, with around 60% expecting further expansion over the next year.

Profitability also showed resilience. Despite a reported increase in input costs, MSMEs across sectors experienced improved net profit margins. Looking ahead, respondents in the services and trading sectors anticipate relatively higher increases in costs compared to the manufacturing sector, yet they remain confident in sustaining their profitability in the upcoming year.

The availability of skilled labour has shown a notable improvement in this round. Nearly one-fourth of MSMEs across all sectors reported better availability of skilled workers. This positive trend is expected to continue, with businesses optimistic about further improvements in skilled labour availability over the coming year.

The capacity utilisation of the respondents improved during the current round with nearly a fifth of the respondents reporting to have above normal capacity utilisation level, for both manufacturing and services sector enterprises. This momentum is expected to carry forward, with nearly 29% of respondents projecting a further increase in capacity utilisation in the next year.

Access to finance has improved, with 88% of participating MSMEs confirming the availability of overall finance—an increase from 79% in the previous survey. This trend is especially prominent in the trading sector. With increased sales, capacity utilisation, and input costs, there is now greater potential for expanding formal credit to support the sector’s financing needs.

The survey suggests a gradual improvement in the interest rate environment with the respondents reporting rise in cost of finance coming down vis-à-vis the previous round.  MSMEs nevertheless, remain concerned about the high cost of finance. The recent 100 basis point reduction in the RBI's benchmark repo rate since February 2025 points to a positive trend, with interest rate transmission underway and this is expected to address the concerns of the MSMEs. 

The current survey also highlights an improvement in the Ease of Doing Business (EoDB). Around 50% of respondents across sectors reported a better EoDB experience during Q1FY26. Expectations for the future are equally positive, with more than 60% anticipating further enhancements in the next one year. In particular, about 50% of respondents noted improvements in return filings and periodic compliance procedures.