 "MSME sector stays resilient in Q2, eyes festive season boost: Sidbi report")
Micro, small and medium enterprises (MSMEs) remain optimistic about business prospects, supported by stronger domestic demand, easing cost pressures, and policy measures such as goods and services tax (GST) rate cuts, according to a survey by Small Industries Development Bank of India (Sidbi).
The survey measured sales, profit margins, skilled labour availability, and access to finance, based on responses from 1,200 MSMEs across sectors and regions.
Services sector rise, exports dip
While sales sentiment softened modestly in the July-September quarter (Q2), 50 per cent of trading and 47 per cent of manufacturing MSMEs reported positive growth, slightly lower than in the previous quarter. The services sector, however, continued to perform strongly. Firms expect revenue momentum to pick up further during the festive season.
Export optimism dipped this quarter, with only 43 per cent of MSMEs reporting growth in export sales. However, 56 per cent of exporters expect healthy growth in 2026. Input cost pressures eased in manufacturing and trading in line with low wholesale inflation, while the services sector reported stable costs. Still, many firms remain cautious about future price challenges.
Business margins improve
Profitability across MSMEs largely held steady, with nearly one in five businesses reporting improved margins. Despite 15-20 per cent of firms facing some pressure on profits, overall optimism about next year remains high, particularly in the manufacturing and services sectors.
The survey also pointed to an easing interest burden, especially in manufacturing, where the share of MSMEs reporting higher financing costs fell from 41 per cent to 33 per cent. However, expectations of elevated borrowing costs remain amid uncertainty over interest rate trends.
Credit remains uneven
According to Sidbi, credit availability remains uneven. In manufacturing, 92 per cent of firms said credit is accessible, though many still find it inadequate. In contrast, 19 per cent of services-sector MSMEs reported difficulties in securing finance. Manufacturers remain hopeful that policy support will improve credit flow.
Labour market trends were positive, with a rise in skilled labour availability across sectors. However, respondents indicated that shortages remain a consistent challenge. Capacity utilisation also improved, with 25 per cent of manufacturers and 20 per cent of service providers reporting above-normal utilisation. About 42 per cent of manufacturing and 35 per cent of services firms expanded capacity this quarter.
On ease of doing business, MSMEs reported steady improvements across parameters such as permits, electricity supply, and regulatory compliance. Over 60 per cent of respondents across sectors expect conditions to improve further in the coming year.