Business confidence among India’s micro, small and medium enterprises (MSMEs) declined for the fourth consecutive quarter in April-June 2026, as cost pressures and demand concerns weighed on sentiment, according to the latest MSME Outlook Survey by the Small Industries Development Bank of India (SIDBI).
 
The MSME Business Confidence Index (M-BCI), which measures current business conditions, moderated to 59.3 in April-June 2026 from 59.8 in the previous quarter. The index has declined steadily from 63.8 in April-June 2025 to 61.6 in July-September, 60.8 in October-December and 59.8 in January-March 2026.

The report said the latest reading indicated “cautious optimism amid cost pressure and demand concerns.” It, however, noted that the index continued to remain above the expansion threshold across manufacturing, trading and services, indicating resilience among MSMEs.
 
An index reading above 50 indicates expansion in business conditions, while a reading below 50 signals contraction. SIDBI’s quarterly survey is based on responses from around 1,200 MSMEs across manufacturing, trading and services.
 
The moderation was visible across all three sectors. Manufacturing business confidence declined to 59.5 from 60.1 in the previous quarter, while trading slipped to 56.5 from 57.2. Services confidence also edged lower to 60.4 from 60.8.
 
Sales and profitability emerged as key pressure points during the quarter.
 
“Sales sentiment softened across MSME sectors in Round 7 (Apr-Jun 2026), with a marginal decline in optimistic responses,” the SIDBI report said. It added that the share of pessimistic responses increased for manufacturing and services enterprises compared with the previous round, while it declined for trading firms.
 
Profit margins also remained under pressure. Only 21 per cent of manufacturing, 20 per cent of trading and 22 per cent of services enterprises reported an improvement in net profit margins, while 20-30 per cent reported a decline. A majority of firms, however, reported no significant change in margins.
 
Skilled labour availability remained another challenge, with around 20 per cent of respondents in manufacturing and services reporting deterioration. Financing conditions were comparatively stable, with firms reporting broadly steady access to working capital finance.

Despite the moderation in current confidence, MSMEs remained positive about the coming quarters. The MSME Business Expectations Index (M-BEI) stood at 60.1 for July-September 2026 and 61.2 for April-June 2027.
 
“Future outlook remains positive,” the report said, adding that the readings signal “sustained optimism about business prospects.” Manufacturing expectations were particularly strong, with its expectations index projected at 61.2 for July-September 2026 and 63.4 for April-June 2027.