MSME Business Confidence Dips in Q2 After Three-Quarter Rise: SIDBI Survey

The business sentiment of MSMEs in the country, measured by the business confidence index, dropped in the second quarter of the current financial year after a three-quarter increase, according to the latest round of the SIDBI MSME Outlook Survey for Q2 FY26. The index, which indicates how optimistic or pessimistic business leaders are about their business performance, noted a slight moderation in business optimism among Indian MSMEs, likely attributed to the emerging global challenges such as U.S. tariff measures and other external economic pressures.

The composite business confidence index for the July-September 2025 quarter declined to 61.64 after surging to 63.75 in the previous quarter from 60.82 during the March quarter and 58.30 during the December quarter last year.

While there are signs of easing of interest burden of MSMEs, particularly in manufacturing, where the share of those reporting an increase in cost of finance or interest rates fell from 41 per cent to 33 per cent. However, expectations of elevated finance costs persist across sectors, reflecting cautious sentiment about future interest rate trends. 

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Further, the adequacy of available credit is still a concern among MSMEs. While for manufacturing MSMEs credit is available, many find it inadequate. Similarly, services MSMEs find it difficult to get finance.

However, overall manufacturing and services maintained steady optimism in business confidence. The composite business expectation index projected a positive outlook, with the index expected to rise to 62.26 in the next quarter and further to 66.57 in the quarter one year ahead (July-September, 2026). 

This reflected MSMEs’ anticipation of improved market conditions, driven by stronger domestic demand and supportive policies such as the cut in GST on a wide range of products and services. The services sector, in particular, shows robust expectations for future growth.