Business confidence among MSMEs improved in Q1 FY26: Sidbi survey

Business confidence among micro, small, and medium enterprises improved in the April-June quarter, backed by steady domestic demand and a supportive financial environment, according to the latest MSME Outlook Survey released by SIDBI on Wednesday.

The Composite MSME Business Confidence Index (M-BCI) rose to 63.75 during the quarter under review from 60.82 in the previous quarter. A value above 50 suggests positive sentiment.

Manufacturing and trading MSMEs drove the gains, while the services sector remained stable with a marginal decline, it showed.

The MSME Business Expectations Index (M-BEI), reflecting the outlook for upcoming quarters, stood at 62.19 for July-September and 67.88 for the first quarter of the next fiscal, suggesting sustained optimism despite headwinds like global tariffs and trade volatility.

A total of 88 per cent of respondents reported improved access to finance, up from 79 per cent in the previous round, the survey said.

The report also indicated that fewer MSMEs experienced a rise in borrowing costs, indicating early signs of transmission from the Reserve Bank of India's cumulative 100 basis point repo rate cut since February 2025  Over half the respondents reported an increase in sales and profitability, while expectations for the next four quarters remain bullish. Notably, profit margins improved despite lingering cost pressures, it said.

Among the other key findings, the survey found, about 21 per cent of manufacturing and 20 per cent of services sector MSMEs operated at above-normal capacity, up from 1214 per cent previously.

Exporters flagged concerns over tariff-related uncertainties, with 40 per cent indicating an adverse impact.

The findings are based on a survey of 1,200 MSMEs across 15 states and 45 districts, conducted by SIDBI's Economic Research and Data Analysis Vertical in partnership with the Academy of Management Studies, Lucknow.