MSMEs Maintain Cautious Outlook Amid Economic Challenges

A SIDBI survey indicates that despite rate cuts by the Reserve Bank, MSMEs remain cautious about future interest rates. Concerns persist about credit availability. MSMEs report easing interest burdens but anticipate stable profitability, improved debtor realization, and rising capacity utilization. However, skilled labor availability remains a structural challenge.

A recent SIDBI survey highlights that despite significant rate cuts by the Reserve Bank of India, micro, small, and medium enterprises (MSMEs) exhibit caution towards future interest rate trends. The survey emphasizes ongoing concerns about credit availability in this critical segment of the Indian economy.

The finding shows a positive development in the manufacturing sector, where the proportion of MSMEs reporting increased finance or interest costs dropped from 41% to 33%. Nonetheless, the expectation of elevated finance costs persists, reflecting widespread apprehension about future interest rate trends across sectors.

The survey further indicates that while concerns over credit adequacy and skilled labor persist, there is optimism about future profitability and improving debtor realization. MSMEs in particular signal a gradual rise in capacity utilization, potentially leading to new capital expenditures, despite a sluggish growth in private capital investment.

(With inputs from agencies.)