Availability of skilled labours in MSMEs improve, access to finance spikes

The availability of skilled labour in the MSME sectors has improved, with one in four MSMEs reporting better access to qualified workers, the third edition of the MSME Outlook Survey released by Small Industries Development Bank of India (SIDBI) said. The trend is expected to persist in the coming year, it stated.

Additionally, nearly 20 per cent of respondents, especially in the manufacturing and services sectors, reported above-normal capacity utilisation. Around 29 per cent anticipate higher utilisation in the next 12 months.

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Further, access to finance witnessed a significant jump, with 88 per cent of MSMEs confirming availability of funds, compared to 79 per cent in the previous survey.

This trend was most visible in the trading sector, reflecting stronger credit flows in line with rising operational demands, the report highlighted.

The survey also showed that over half of the MSMEs in manufacturing and trading recorded sales growth in Q1FY26. In the services sector, 42 per cent reported improved sales while 48 per cent indicated stability. Year-on-year, consistent growth was observed across all sectors, with nearly 60 per cent of respondents expecting continued sales expansion.

Despite rising input costs, MSMEs across sectors reported improved profit margins. While cost pressures are anticipated to be higher in the services and trading sectors going forward, most enterprises remain confident in maintaining profitability.

On the cost of credit, the survey noted a reduction in the pace of interest rate increases. MSMEs still flagged high borrowing costs as a concern, but recent monetary easing, including a 100-basis-point cut in the RBI’s benchmark repo rate since February 2025, is seen as a step towards alleviating these pressures.

Ease of Doing Business (EoDB) also showed signs of improvement. About 50 per cent of MSMEs reported a better EoDB experience during the quarter, while over 60 per cent expect further improvements over the coming year. Notably, half the respondents highlighted smoother return filings and compliance procedures.

As per the report, the Composite Business Confidence Index (M-BCI) for the first quarter of FY2026 rose to 63.75, up from 60.82 in the previous quarter. The forward-looking Business Expectations Index (M-BEI) remains robust at 62.19 for the next quarter and climbs to 67.88 for Q1 FY2027.