Based on inputs from 1,200 MSMEs across manufacturing, services, and trading sectors, the survey tracks key indicators through the Composite MSME Business Confidence Index (M-BCI) and the MSME Business Expectations Index (M-BEI), both rated on a scale of 0 to 100. Scores above 50 indicate a positive outlook.
According to the survey, the M-BCI rose to 63.75 in Q1 FY2026, up from 60.82 in the previous quarter, signalling an improving business environment. The manufacturing and trading sectors led this upward trend. While the services sector recorded a very marginal dip in its confidence index compared to Q4 FY2025, it remains well above the 60-mark, reflecting continued optimism.
Looking ahead, the M-BEI for the next quarter stands at 62.19, rising further to 67.88 for the same quarter next year, indicating sustained optimism. The trading and services sectors recorded especially strong expectations, with M-BEI scores of 68.32 and 68.24, respectively, for Q1 FY2027. A slight dip projected for Q2 FY2026 is attributed to short-term global uncertainties and not to any underlying weakness.
In terms of sales performance, over half of MSMEs in manufacturing and trading reported growth in Q1 FY2026. In the services sector, 42% reported sales growth, while 48% maintained stable performance. Year-on-year, MSMEs across all sectors reported consistent sales growth, with nearly 60% expecting further expansion.
Profit margins also improved, despite increased input costs. MSMEs in the services and trading sectors expect higher cost pressures going forward, but remain confident in sustaining profitability.
The availability of skilled labour showed a notable improvement, with nearly 25% of MSMEs reporting better access. Optimism remains strong for continued improvements across all sectors.
Capacity utilisation also increased, with around 20% of MSMEs operating above normal levels. Nearly 29% expect further utilisation increases over the next year, pointing to strengthening demand.
On the finance front, 88% of MSMEs reported improved access to funding, compared to 79% in the previous round. This was especially evident in the trading sector, reflecting a rise in formal credit uptake.
The survey also pointed to a softening interest rate environment, with fewer MSMEs reporting a rise in borrowing costs. This aligns with the Reserve Bank of India’s 100 basis point reduction in the benchmark repo rate since February 2025, signalling improving credit conditions.
Meanwhile, the Ease of Doing Business (EoDB) environment has improved, with around 50% of respondents reporting a better experience in Q1 FY2026. Over 60% anticipate further enhancements in the coming year, especially in compliance and return filing procedures.
