The PHD Chamber of Commerce and Industry Round 3 findings of the SME Market Sentiment Index (SMESI), indicate sustained expansion in India’s SME manufacturing sector alongside a guardedly improving outlook for the coming quarter (Jan-March 2026), supported by expectations from the upcoming Union Budget FY2027, said Mr. Rajeev Juneja, President, PHDCCI, in a press statement issued here today.   

The SME Business Activity Index (SME-BAI) rose to 58.9 during October–December 2025, up from 58.3 in the previous quarter, remaining well above the neutral threshold of 50, he said. 

He added, the improvement reflects stronger new orders, stable production levels, improved employment conditions, easing supplier delivery timelines, and higher inventory restocking in anticipation of future demand. The rise in new orders are in line with a year-on-year increase in consumer durable output as per the Index of Industrial Production during the same period, strengthening signs of demand recovery.

The SME Business Outlook Index (SME-BOI) for January–March 2026 increased marginally to 60.8, suggesting cautious approach due to global uncertainty. Nearly half of respondents expect business activity to remain unchanged in the near term, however, the percentage anticipating improvement has increased compared to Round 2. Hiring intentions show gradual improvement, and a majority of respondents expect higher capital expenditure, indicating confidence in medium-term growth prospects, he said.

Union Budget FY2027: Expected Impact on SMEs

Expectations from the Union Budget FY2027 are a key factor supporting the positive outlook. Continued emphasis on public capital expenditure, is expected to support infrastructure-linked SME demand, particularly in agriculture and allied manufacturing sectors. Enhanced credit support measures, and reduced borrowing costs are likely to strengthen SMEs investment planning, with potential upside to the SME Business Outlook Index in subsequent quarters, he said.

Continued export support measures are expected to bolster new orders for manufacturing SMEs, while investments in digital infrastructure and supply-chain capabilities are anticipated to improve market access, productivity, and employment generation. 

Dr. Ranjeet Mehta, CEO and Secretary General, PHDCCI, stated that the survey underscores the need for targeted incentives, enhanced R&D support, and robust development frameworks to accelerate technology adoption among SMEs. He further emphasized that timely enforcement of the 45-day payment norm for MSMEs, a review of quality control orders impacting machinery imports, rising energy costs, and