India's MSME sector shows cautious optimism despite cost pressures in 2024
India's micro, small and medium enterprise (MSME) sector is showing steady confidence, with businesses reporting stable conditions and forward-looking optimism. Recent data from SIDBI's surveys for 2024-2026 highlights a mixed but largely positive outlook across manufacturing, services and trade.
The composite MSME Business Conditions Index (M-BCI) currently stands at 60.8, indicating broadly stable operating conditions. A year-on-year comparison reveals improved sentiment, supported by a favourable domestic economy and better credit access.
The manufacturing sector leads the way, with its M-BCI climbing to 64.1. Firms in this area report stronger sales and higher expectations for future growth. Optimism around working capital availability has also surged, with 46% of manufacturers expressing positive sentiment.
In contrast, the services and trading sectors face some near-term pressures. Their sentiment has softened slightly, and profit margins have either declined or turned negative. Rising costs, particularly labour expenses, are weighing on these businesses. Wages in manufacturing and textiles have jumped by 8-12% annually due to higher minimum wages, inflation and worker demands, while some service sectors saw more modest increases of 5-7%.
Looking ahead, export-focused MSMEs are tapping into policy-backed financial measures to boost competitiveness. The composite MSME Business Expectations Index (M-BEI) is projected to rise to 63.7 in the next quarter and further strengthen to 65.0 a year later, signalling sustained optimism.
The latest figures reflect a resilient MSME sector, with manufacturing driving growth while services and trade adjust to cost challenges. With stronger credit availability and policy support, businesses expect conditions to improve further in the coming quarters. The outlook remains cautiously optimistic as firms navigate wage pressures and market demands.
