Indian Small Businesses Thrive Amid Challenges of Increasing Costs

Indian small businesses achieved their highest growth since 2019, despite rising costs impacting their future potential. A report shows 80% growth in 2025, with optimism continuing for 2026. Yet, cost pressures, especially materials, remain a concern alongside strong financing demand and export hurdles due to geopolitical factors.

Indian small businesses are experiencing their strongest growth since 2019, as revealed in a new report. Despite this, escalating costs present major challenges to future expansions. The CPA Australia's Asia-Pacific Small Business Survey reported that 80% of small businesses in India expanded last year, significantly surpassing the regional average of 63%.

The outlook for 2026 remains positive, with 87% of businesses predicting growth and 84% anticipating improvements in the local economy. This optimism places India among the most buoyant markets in the Asia-Pacific region, driven by enhanced customer experiences and increased technology adoption. However, sustained growth faces obstacles from rising expenses, with 42% of businesses citing cost increases as their primary concern for 2025.

The report highlights the crucial role of MSMEs in job creation, as they are led by a younger generation of entrepreneurs driving growth and innovation. The demand for external financing has also risen, reaching 80% of Indian MSMEs, an increase from 72% in 2024, while 53% of businesses found obtaining finance relatively easy. Nevertheless, geopolitical uncertainties since March have made the business landscape more volatile, mainly affecting manufacturing and export-oriented MSMEs. Yet, the depreciating rupee has improved export margins, offering some relief.

Aniket Talati of CPA Australia in India emphasized that sustaining growth and profitability will require strategic planning. Businesses must adopt proactive cost management strategies and invest in renewable energy sources and other alternatives, alongside managing cash flows and risks effectively.