Ease of Doing Business for MSMEs: In the financial year 2022-23, Indian small and medium businesses have seen a decline in confidence to drive business growth. This is due to a difficult market environment marked by declining sales, increasing cost pressures, and reduced domestic and export demand.
The findings are part of the survey “Small Business Confidence Index (SBCI)” conducted by industry association ASSOCHAM and business consultancy firm Dun & Bradstreet (D&B).
Also Read: No proposal to implement MSME rating system: MSME ministry
Launched by B. B. Swain, Secretary of the Ministry for Micro, Small and Medium Enterprises (MSMEs) during the ASSOCHAM MSME Excellence Awards & Summit, the survey measures the optimism level among SMEs regarding business growth parameters such as sales, employment, prices, inventory, and investment.
To put things in perspective, D&B Small Business Confidence Index survey shows that the optimism of small businesses has moderated to 71 points in Q1 2023, compared to the higher confidence levels of 87 points in Q2 2022.
“While the domestic economy remained resilient throughout the year, it recorded a slowdown towards the end of 2022 as a lag effect of global stagflationary pressures,” said the survey.
Small exporters are feeling the impact of decline in confidence with only 48 per cent expecting an increase in new export orders in Q1 2023 as compared to 86 per cent Q2 2022.
The outlook for domestic businesses is dwindling too with 67 per cent expecting an increase in sales Q1 2023, down from 75 per cent in Q2 2022.
Also read: Now banks can check the probability of an MSME turning NPA. Here’s how
The rise in input costs and reduced demand has increased cost pressure on small businesses, affecting their investment capacity and growth strategy. As a result, only 62 per cent of respondents intend to make new investments in Q1 2023, compared to 77 per cent in Q2 2022. Similarly, only 57 per cent of SMEs expect to hire new employees in Q1 2023, down from 76 per cent in Q2 2022
The outlook for profitability remains on similar lines, with 62 per cent of the respondents anticipate an increase in Q1 2023, down from 77 per cent in Q2 2022.
Despite the decline, the confidence of India’s small businesses is higher when compared to their global peers more. This is largely because Indian economy is better poised amidst the global geo-political, economic, and supply chain landscape.
On a positive note, this suggests that Indian small businesses may be better equipped to weather economic challenges and navigate market disruptions than their global counterparts.
Subscribe to Financial Express SME (FE Aspire) newsletter now: Your weekly dose of news, views, and updates from the world of micro, small, and medium enterprises