SIDBI MSME Outlook Survey Q3 FY26: Business Confidence Remains Expansionary, Manufacturing Leads Recovery

The Small Industries Development Bank of India has released the fifth edition of its MSME Outlook Survey for October to December 2025, highlighting stable business confidence across the micro, small and medium enterprises segment despite prevailing external risks.

Composite MSME Business Conditions Index Holds Above Expansion Threshold​

The Composite MSME Business Conditions Index stood at 60.8 in Q3 FY26, marginally lower than 61.6 in the previous quarter. An index reading above 50 indicates an expansionary outlook, signalling that MSMEs continue to operate in growth territory even as certain sectors witness moderation.

On a year-on-year basis, the M-BCI recorded improvement across both composite and sectoral levels, supported by a favourable domestic macroeconomic environment and supportive credit policies.

Manufacturing Sentiment Strengthens; Services and Trading Moderate​

Sector-wise data from the survey shows divergence in sentiment trends.

Manufacturing sentiment strengthened during the quarter, with the M-BCI rising to 64.1 from 62.9 in the preceding quarter. Enterprises in this segment reported stronger sales sentiment and higher expectations for future growth.

In contrast, trading and services sectors recorded moderation. While sales sentiment in these segments showed limited improvement during the quarter, respondents expressed optimism about business prospects in the coming periods.

MSME Business Expectations Index Signals Improvement Ahead​

The Composite MSME Business Expectations Index projects further improvement in business confidence. The index is expected to rise to 63.7 in the next quarter and increase further to 65.0 in October to December 2026.

This forward-looking indicator suggests that MSMEs anticipate strengthening demand conditions and improved operating environments over the medium term.

Access to Finance Shows Improving Trend​

The survey highlights positive movement in finance-related sentiment, particularly in the manufacturing segment.

Optimism regarding working capital finance among manufacturing units increased to 46 percent, up from 35 percent in the previous quarter. Sentiment on overall finance availability in manufacturing also improved to 47 percent.

In the services sector, finance-related sentiment improved marginally. Trading enterprises reported moderation in working capital finance sentiment but registered stronger overall finance confidence.

Profit Margin Concerns Persist in Services and Trading​

Despite expansionary conditions, concerns around profitability surfaced in services and trading segments. The Net Response on profit margins declined or turned negative sequentially in these sectors.

However, respondents across segments expect profitability to improve over the next year, indicating confidence in future demand and operational adjustments.

Exporters Plan to Leverage RBI Trade Relief and Credit Schemes​

Among exporting MSMEs, the survey indicates active intent to use policy support measures. Around 43 percent of exporters plan to avail trade relief measures introduced by the Reserve Bank of India.

Additionally, 46 percent intend to adopt the Credit Guarantee Scheme for Exporters, while nearly 37 percent expect to utilise both options.

Outlook: Stable Expansion with Manufacturing Momentum​

Overall, the Q3 FY26 MSME Outlook Survey underscores a stable and expansionary business environment. While services and trading face margin pressures and moderate sales sentiment, manufacturing continues to lead the recovery.

With improving access to finance, supportive macroeconomic conditions, and positive expectations reflected in the Business Expectations Index, the MSME sector appears positioned for gradual strengthening in the coming quarters.