SIDBI's Latest MSME Outlook Survey Reflects Growing Confidence and Resilience in Q1 FY2026 More than half of the MSMEs in manufacturing and trading reported sales growth during the quarter, while 42 per cent of services-sector MSMEs saw an uptick in sales and nearly half reported stable figures
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The Small Industries Development Bank of India (SIDBI) has released the third edition of its quarterly MSME Outlook Survey, covering the April–June 2025 period (Q1 FY2026). The findings indicate steady growth in business sentiment and expectations across India's Micro, Small, and Medium Enterprises (MSMEs), with improvement noted across several operational indicators such as sales, profitability, skilled labour availability, and access to finance.
The M-BCI for Q1 FY2026 rose to 63.75, up from 60.82 in the previous quarter, suggesting continued momentum in overall business conditions. The M-BEI, which reflects future expectations, stood at 62.19 for the next quarter and is projected to climb to 67.88 for the same quarter next year. These indices (on a scale of 0–100, with above 50 indicating positive sentiment) reflect sustained optimism, particularly within the trading and services sectors.
While there is a slight dip projected for Q2 FY2026, attributed to broader global uncertainties, long-term expectations remain strong.
Sectoral trends
Sales performance remained solid. More than half of the MSMEs in manufacturing and trading reported sales growth during the quarter, while 42 per cent of services-sector MSMEs saw an uptick in sales and nearly half reported stable figures. Looking ahead, 60 per cent of businesses across sectors expect further growth in the next year.
Profitability also held up despite rising input costs. Margins improved across the board, particularly in the services and trading sectors, which anticipate slightly steeper cost increases but remain confident in maintaining profitability.
One of the notable trends this quarter was an improvement in skilled labour availability. Around one-fourth of MSMEs reported better access to skilled workers, a concern that has lingered in previous quarters. Expectations point toward further improvements in the coming year.
Capacity utilisation rose across manufacturing and services, with nearly 20 per cent of respondents operating above normal capacity levels. Forward-looking estimates suggest this will rise further, with 29 per cent of MSMEs expecting increased utilisation over the next 12 months.
Financing conditions also showed improvement. The percentage of MSMEs confirming sufficient access to finance increased to 88 per cent in this round, up from 79 per cent previously. The increase was particularly significant in the trading sector. As sales and capacity expand, the data points to a larger opportunity for formal credit to support business needs.
Meanwhile, concerns about the high cost of borrowing persist, though the pressure appears to be easing. Respondents reported a slowdown in the pace of finance cost increases, aligning with the Reserve Bank of India's recent 100 basis point repo rate cut since February 2025. Transmission of lower rates is underway, potentially offering some relief to MSMEs in the coming quarters.
On the other hand, the ease of doing business has improved for nearly 50 per cent of the surveyed MSMEs. Key improvements were reported in regulatory areas like return filing and compliance. Looking ahead, over 60 per cent of respondents expect further progress on this front in the next year.
