MSME manufacturing in expansion mode amid global crisis: Report

The Micro, Small, and Medium Enterprises (MSME) manufacturing sector remains in expansion mode during the January-March 2026 quarter even amid the global businesses suffer due to the West Asia crisis. However, the growth momentum showed signs of moderation due to external challenges, said SME Market Sentiment Index (SMESI) released by the PHD Chamber of Commerce and Industry.

The SME Business Activity Index stood at 56.5 in Q4 FY26, indicating continued expansion, though it moderated from 58.9 recorded in the previous quarter.

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Further, the SME Business Outlook Index registered 58.7 for Q1 FY27 (April-June 2026), lower than 60.7 in the previous quarter, reflecting a positive but softer outlook.

As per the PHD survey, the expansion in business activity was largely driven by new orders and production, although at a slower pace.

“Around 37 per cent of firms reported higher new orders, which supported increased production levels during the quarter,” it said.

The survey highlighted cautious trends in employment and logistics with nearly 60 per cent of firms reported no change in employment levels and supplier delivery timelines, indicating limited hiring and stable domestic supply chain conditions.

Nearly 37 per cent of firms expect expansion in business activity in the April-June 2026 quarter, while nearly half anticipate no change while around 47 per cent expect an increase in capital expenditure. Hiring sentiment remains mixed, with 27 per cent expecting an increase and 23 per cent anticipating a decline, the survey added.

The logistics disruptions due to rerouting through the Red Sea and Strait of Hormuz have increased transit time by 15-20 days. Freight costs and marine insurance premiums have also risen, adding to input and export costs.