The SMESI, which comprises of the SME Business Activity Index (SME-BAI) and the SME Business Outview Index (SME-BOI), is based on a quarterly survey of 3,000 manufacturing MSMEs across India and serves as a leading indicator of economic activity.
Key highlights
– SME Business Activity Index stood at 56.5 in Q4 FY26, indicating continued expansion, though moderating from 58.9 in the previous quarter.
– SME Business Outview Index registered 58.7, reflecting a positive but softer outview for Q1 FY27 (April–June 2026) with 60.7 in the previous quarter.
– Expansion in business activity continues to be driven by new orders and production, though at a slower pace.
– Employment and supplier delivery timelines remained largely unmodifyd, indicating cautious hiring and stable logistics conditions domestically.
SME Business Activity (Jan–Mar 2026)
The manufacturing MSME sector remained in expansion territory during the quarter, supported by an improvement in demand conditions. Around 37% of firms reported higher new orders, translating into increased production levels.However, 60% of firms reported no modify in employment and supplier delivery times, suggesting limited scaling in workforce and stable domestic supply chains.
Inventory levels revealed moderate improvement, indicating gradual demand recovery but not broad-based acceleration.
Business Outview (Apr–Jun 2026)
The outview remains positive but reflects growing caution:
– 37% of firms expect expansion in business activity, while nearly half anticipate no modify
– 47% expect an increase in capital expfinishiture, supported by demand expectations
– Hiring sentiment remains mixed, with 27% expecting an increase and 23% anticipating a decline
The moderation in outview suggests uncertainty around external conditions despite underlying domestic resilience.
Impact of West Asia Crisis
Industest responses highlight significant external challenges affecting MSMEs:
– Logistics disruptions due to Red Sea and Strait of Hormuz rerouting have increased transit time by 15–20 days
– Freight costs and marine insurance premiums have surged, raising input and export costs
– MSMEs face working capital stress, as delayed shipments postpone receivables while resolveed expenses continue
These factors are contributing to margin pressures, delayed cash flows, and cautious business sentiment.
Policy Recommfinishations
Industest stakeholders have highlighted the required for:
– Expansion of tarobtained credit guarantee schemes
– Introduction of working capital interest subvention
– Acceleration of logistics cost support measures
– Investments in energy diversification
The findings indicate that while India’s MSME manufacturing sector continues to expand, growth momentum is moderating due to external shocks, particularly from the West Asia crisis. The sector’s resilience is evident in sustained expansion, but policy support and external stabilization will be critical to maintain the growth trajectory in the coming quarters.
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