PHDCCI Survey Reveals Moderating Growth in India's MSME Sector Amid Global Challenges
MSME activity expands but loses steam as global headwinds bite: PHDCCI survey
The Economic Times
Image: The Economic Times
The PHD Chamber of Commerce and Industry's survey indicates that India's manufacturing MSME sector experienced growth in early 2026, with the SME Business Activity Index at 56.5. However, global challenges, particularly from the West Asia crisis, are causing caution in outlook, with the SME Business Outlook Index dropping to 58.7.
- 01The SME Business Activity Index stands at 56.5, indicating continued but slowing expansion.
- 02The SME Business Outlook Index decreased to 58.7, reflecting a softer outlook for Q1 FY27.
- 03Logistics disruptions and rising costs due to the West Asia crisis are impacting MSMEs.
- 0437% of firms expect business expansion, while nearly half anticipate no change.
- 05Policy recommendations include targeted credit schemes and logistics support.
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The PHD Chamber of Commerce and Industry (PHDCCI) has released its SME Market Sentiment Index (SMESI) for January to March 2026, highlighting a continued expansion in India's manufacturing MSME sector, with the SME Business Activity Index at 56.5. This marks a decline from 58.9 in the previous quarter, indicating a moderation in growth. The SME Business Outlook Index also softened to 58.7 from 60.7, showing cautious optimism for the upcoming quarter (April to June 2026).
The manufacturing sector's expansion is driven by improved demand, with 37% of firms reporting higher new orders. However, 60% of firms noted no change in employment or supplier delivery times, suggesting limited workforce scaling and stable logistics. The survey also pointed to significant external challenges, particularly due to the West Asia crisis, which has led to increased logistics costs and transit delays of 15–20 days.
Industry stakeholders have urged for policy support, including targeted credit guarantee schemes and measures to address rising logistics costs. While the MSME sector shows resilience, maintaining growth will require addressing these external pressures effectively.
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The moderation in growth and external pressures may lead to cautious hiring and investment decisions among MSMEs, affecting job creation and economic stability.
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