Trump's tariff clouds cast a spreading gloom over export-focused MSME mood

The downward sentiment comes despite the Composite MSME Business Confidence Index (M-BCI) indicating a favourable business environment for MSMEs

     

The Small Industries Development Bank of India, in its third edition of 'MSME Outlook Survey', notes that tariff woes are dampening the mood among micro, small, and medium enterprises (MSMEs). This is despite the Composite MSME Business Confidence Index (M-BCI) for the first quarter (Apr-Jun) of the current financial year rising to 63.75 from 60.82 in the previous round, indicating a favourable business environment for MSMEs.

 

Export turnover improved markedly for the manufacturing sector between Rounds 2 and 3, with 53 per cent of the respondents (exporters) indicating a sequential increase in sales. On a year-on-year basis, the export sales also improved for manufacturing exporters with 57 per cent respondents indicating increase in sales. However, the respondents in the sector appear to have subdued expectations one-year ahead with only 45 per cent expecting a growth from the current levels, possibly indicating the uncertainty on the tariff front.

 

For services enterprises, 51 per cent of the respondents confirmed increased sales vis-à-vis 64 per cent in the previous quarter. The one-year ahead expectations also appear to be relatively subdued with 38 per cent of the respondents expecting an increase in sales. Nevertheless, 51 per cent of the respondents in the service sector expect to retain the sales figures of the last quarter in the quarter a year ahead. 

51 per cent of the respondents confirmed increased sales vis-à-vis 64 per cent in the previous quarter

   

Meanwhile, exporting MSMEs have been impacted by US tariff uncertainties. Nearly 40 per cent of the respondents, both in the manufacturing and services sector, have been impacted- directly or indirectly- by the tariff uncertainties. However, nearly a fifth of the manufacturing entities are unsure of the impact of tariff uncertainties. In the case of the services sector, the majority of the respondents, at 53 per cent, have not been impacted by the tariff uncertainties.

 

40 per cent of the respondents, both in the manufacturing and services sector, have been impacted by the tariff uncertainties