MSME Confidence Boosted by GST Rate Cuts and Festive Demand: SIDBI Report

India's Micro, Small, and Medium Enterprises (MSMEs) are experiencing a surge in confidence, fueled by recent GST rate cuts and the anticipated boost from the ongoing festive season. This positive outlook is highlighted in the latest MSME Outlook Survey released by the Small Industries Development Bank of India (SIDBI). The survey captures the sentiments of 1,200 MSMEs across manufacturing, services, and trading sectors, providing valuable insights into the current business environment and future expectations.

The Composite MSME Business Confidence Index (M-BCI) reflects this upward trend, although with a slight moderation. For the period of July-September 2025, the M-BCI stood at 61.64, a dip from 63.75 in the previous quarter. Despite this minor decrease, optimism remains strong, particularly within the manufacturing and services sectors. The MSME Business Expectations Index (M-BEI) projects a positive outlook, anticipating improved market conditions driven by stronger domestic demand and supportive policies, including the reduction in GST rates on various products and services. The M-BEI is expected to rise to 62.26 in the next quarter and further to 66.57 in the quarter one year ahead (July-September 2026).

The GST Council's overhaul in September 2025, which consolidated multiple slabs into two primary rates (5% and 18%), is expected to act as a significant consumption booster. By reducing tax rates on a wide array of household items, automobiles, and consumer durables, the government aims to stimulate demand and provide a competitive edge to MSMEs. Industry associations have reported that these GST cuts have already provided a fillip to MSMEs, with most firms reporting healthy order books.

The festive season is also playing a crucial role in bolstering MSME confidence. With increased consumer spending during festivals like Diwali and Christmas, MSMEs anticipate a surge in revenue and profits. The survey indicates that revenue expectations remain upbeat, fueled by the festive season. While sales sentiment softened slightly in July-September 2025, with 50% of trading and 47% of manufacturing MSMEs reporting positive growth, the services sector has maintained its momentum.

However, the MSME sector isn't without its challenges. A slight moderation in business optimism has been observed due to emerging global challenges such as US tariff measures and other external economic pressures. Export growth experienced a temporary slowdown, with only 43% of MSMEs reporting positive growth in export sales. Despite this, exporters anticipate a strong rebound, with 56% expecting healthy growth next year.

SIDBI plays a crucial role in supporting MSMEs by providing access to finance, promoting skill development, and advocating for policy reforms. The survey also highlighted that access to credit has improved marginally, though some service-sector firms continue to face challenges. Furthermore, the survey noted continued improvement in Ease of Doing Business (EoDB) indicators such as permits, compliance, and electricity supply, with over 60% of MSMEs expecting further progress next year.