PR No – 179
26th September 2025
New Delhi
PHDCCI Releases Round 2 of SME Market Sentiment Index: Business Activity Expands but Hiring Outlook Softens
New Delhi, September 26, 2025
The PHD Chamber of Commerce and Industry (PHDCCI) today announced the findings of the Round 2 SME Market Sentiment Index (SMESI), a quarterly indicator assessing the performance and outlook of India’s SME manufacturing sector. The Index—comprising the SME Business Activity Index (SME-BAI) and the SME Business Outlook Index (SME-BOI)—is based on a survey of 3,000 SME firms across diverse manufacturing sectors nationwide.
Key Highlights of Business Activity Round 2 (April – June 2025):
· SME Business Activity Index (SME-BAI) rose to 58.3, up from 57.7 in Round 1, signalling continued expansion in SME business activity.
· The uptick was primarily driven by a substantial improvement in supplier delivery times, reflecting easing of logistics constraints.
· However, new orders fell to 61.7 (from 71.7 in Round 1), indicating weak demand conditions.
· Output/Production declined moderately to 63.3 (from 66.7 earlier).
· Employment sentiment weakened, falling to 51.7 (from earlier Round 1, 55) as SMEs reported lower job creation amid geopolitical uncertainty.
· Inventory levels rose to 66.7, suggesting restocking in anticipation of a demand rebound.
Business Outlook (October – December 2025):
· The SME Business Outlook Index (SME-BOI) stood at 60, marginally lower than 60.3 in Round 1, indicating steady yet cautious optimism.
· Business activity outlook: 53% of respondents expect no change, while 33% anticipate improvement.
· Hiring plans remain muted, with 57% of SMEs reporting no new hiring intentions.
· Capital expenditure sentiment is robust, with 60% of SMEs planning to increase investments, signalling long-term confidence bolstered by post-GST 2.0 reforms.
Industry Response:
Industry participants underscored the importance of speedy disbursal of payments, particularly in the backdrop of global trade uncertainties, to enable SMEs to make timely purchasing decisions. They highlighted the need for targeted incentives, R&D grants, and incubation support to promote innovation and technology adoption across the sector.
A review of the Quality Control Orders (QCOs) on machinery, spares, and components was also recommended to ensure smoother SME operations.
Further, the industry strongly called for strict enforcement of the 45-day payment rule for MSMEs, including compliance by government entities and PSUs. Stakeholders also urged the government to expedite the release of blocked funds, such as Earnest Money Deposits (EMDs), security deposits, and bank guarantees in government tenders, while also addressing the impact of natural calamities on input costs, which continues to weigh heavily on SME competitiveness.
Commenting on the release, CEO and Secretary General 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.”
About the Index:
The SME Market Sentiment Index (SMESI) is designed as a leading indicator of economic activity, capturing both current business activity and forward-looking sentiment. Index readings above 50 indicate expansion, below 50 reflect contraction, and a neutral score of 50 signals no change. The survey methodology follows the NIC 2008 classification and covers sectors ranging from food processing and textiles to chemicals, metals, machinery, and electronics.