India’s Composite MSME Business Confidence Index (M-BCI) for the first quarter (Q1) of fiscal 2026 (FY26) rose to 63.75 from 60.82 in the previous quarter, according to the MSME Outlook Survey. This uptick reflects a favourable business environment for MSMEs, with the manufacturing and trading sectors experiencing sharper improvements.
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. Although a moderate dip in the expectation indices is observed for Q2 FY26, the quarterly publication by the Small Industries Development Bank of India (SIDBI) revealed.
In terms of sales performance, more than half of the MSMEs in the manufacturing and trading sectors reported growth in Q1 FY26. Year-on-year, MSMEs across all sectors indicated consistent sales growth, with around 60 per cent expecting further expansion over the next year. Despite a reported increase in input costs, MSMEs across sectors experienced improved net profit margins.
The availability of skilled labour showed a notable improvement. Nearly one-fourth of MSMEs across all sectors reported better availability of skilled workers.
Capacity utilisation among respondents improved during the current round, with nearly a fifth reporting above-normal utilisation levels in both manufacturing and services. This momentum is expected to carry forward, with nearly 29 per cent projecting a further increase in capacity utilisation over the next year.
Access to finance also improved, with 88 per cent of participating MSMEs confirming the availability of overall finance—up from 79 per cent in the previous survey, SIDBI said in a media release.
The survey suggests a gradual improvement in the interest rate environment, with fewer respondents reporting a rise in the cost of finance compared to the previous round. MSMEs, nevertheless, remain concerned about high financing costs.
The recent 100 basis point reduction in the RBI's benchmark repo rate since February 2025 indicates a positive trend, with interest rate transmission underway, which is expected to ease financing challenges for MSMEs.
The current survey also highlights an improvement in the Ease of Doing Business (EoDB). Around 50 per cent of respondents across sectors reported a better EoDB experience during Q1 FY26.
Expectations for the future are equally positive, with more than 60 per cent anticipating further enhancements over the next year. In particular, about 50 per cent noted improvements in return filings and periodic compliance procedures.
The indices, ranging from 0 to 100, reflect MSME sentiment and are based on six key parameters including sales, margins, labour, and finance availability. The current round is based on inputs from a representative sample of 1,200 MSMEs across different regions and industries.
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