PHDCCI's SME sentiment index shows continued expansion amid weak demand, hiring pressures

New Delhi [India], September 26 (ANI): The PHD Chamber of Commerce and Industry (PHDCCI) released findings from Round 2 of the SME Market Sentiment Index (SMESI) on Friday, showing continued expansion in India's SME manufacturing sector, though demand and employment indicators remain under pressure.

The SMESI, based on a survey of 3,000 SME firms across various manufacturing sectors, comprises two components: the SME Business Activity Index (SME-BAI) and the SME Business Outlook Index (SME-BOI).

For the April-June 2025 period, the SME-BAI rose to 58.3 from 57.7 in Round 1, indicating ongoing growth in business activity. The improvement was largely driven by faster supplier delivery times, indicating a reduction in logistics constraints.

However, new orders dropped sharply to 61.7 (from 71.7), and output also declined to 63.3 (from 66.7), reflecting weak demand conditions. Employment sentiment weakened to 51.7, down from 55, as geopolitical uncertainty impacted job creation. Inventory levels rose to 66.7, hinting at restocking in anticipation of future demand.

Looking ahead to October-December 2025, the SME-BOI stood at 60, marginally down from 60.3, indicating steady but cautious optimism. While 53 per cent of SMEs expect no change in business activity, 33 per cent anticipate improvement.

Hiring outlook remains muted, with 57 per cent reporting no new hiring plans. However, capital expenditure intentions remain strong, with 60 per cent of SMEs planning increased investments, buoyed by recent GST 2.0 reforms.

Industry leaders urged faster payment disbursals and strict enforcement of the 45-day MSME payment rule, including by government agencies and PSUs. They also called for a review of Quality Control Orders (QCOs) on machinery and components, as well as the release of blocked funds, including EMDs and security deposits.

Commenting on the release, CEO and Secretary General of PHDCCI, Dr Ranjeet Mehta, said, "The SME sector continues to show resilience despite weak demand and hiring pressures. The improvement in supply-side efficiencies and strong capital expenditure intentions highlight optimism for the medium-term growth trajectory of India's manufacturing SMEs." (ANI)

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