MSME Activity Holds Firm in May; Credit Growth, Exports Show Strength

India’s MSMEs continue to display resilience despite ongoing global economic challenges, as indicated by the latest Sumpoorn MSME Economic Activity Index, a monthly tracker developed by fintech firm Jocata in association with SIDBI. For May 2025, the index recorded a value of 0.57—up from 0.56 in April and 0.55 in May last year—pointing to sustained activity and strength in the MSME ecosystem.  

Over the past year, the index, which provides interpretation of the changes in the monthly MSME sales activity, has ranged between 0.55–0.60 during the first half of FY25 and shifted to a higher 0.58–0.62 band in the second half, reflecting steady momentum in the sector. The upward movement in recent months aligns with broader consumption trends reported by other agencies.  

"The business survey of the Retailers Association of India has seen a 7 per cent YoY growth in retail sales in India in May 2025, compared to a tepid 3 per cent growth in May 2024,” said Narasimhan V., Principal Advisor at Jocata.

Also read: Delayed Payments Choke MSMEs as Dues Cross Rs 50,000 Crore Despite Govt Push

According to the index, access to credit for MSMEs continues to improve. Priority sector lending to micro and small businesses grew 18.7 per cent year-on-year in May on the back of the government’s push toward digitisation and formalisation, along with the impact of various government schemes. Moreover, 55 per cent of the new sub-Rs 1 crore loans went to first-time borrowers. 

"Ongoing business performance in the domestic space and in exports will need to be monitored closely to understand any potential impact on credit repayment behaviour. Continued underwriting rigour and ongoing credit monitoring will go a long way in helping maintain the portfolio quality and pace of lending,” said Narasimhan. 

With respect to consumption, rural demand has also remained firm, supported by record production estimates of rice and wheat for 2024–25, as per the Third Advance Estimates. With an early onset of monsoon and above-average rainfall, agricultural incomes are expected to remain strong; however, "extreme weather events such as floods in the North-east, landslides in Uttarakhand and Himachal through May and June may have a localised impact on small businesses,” said Sumita Kale, Principal Economist, Jocata.  

Also read: MSME Credit Touches Rs 83 Lakh Crore in FY25 Amid Asset Quality Gains: Report

However, urban demand continues to face some constraints, and recovery remains incomplete. “Growth in urban demand has lagged behind rural demand. For MSMEs selling into urban markets, this softer demand limits sales growth. Policy measures such as income tax benefits and interest rate cuts will help over the year, but these trends will need close watching over the coming months,” said Kale. 

Coming to trade, Indian exports, particularly those linked to MSMEs, have performed well despite global tariff uncertainties, the index noted. Non-petroleum exports grew 5 per cent YoY in May. Key sectors showing robust growth were electronic goods exports, growing by 54.10 per cent, marine products exports increasing by 26.79 per cent, and garment exports scaling by 11.35 per cent, signalling that global uncertainties may have opened up new opportunities for Indian exporters.