The PHD Chamber of Commerce and Industry (PHDCCI) has released the fifth round of its SME Market Sentiment Index (SMESI), indicating continued expansion in business activity among India’s manufacturing SMEs during April–June 2026, alongside a moderately improved outlook for the July–September 2026 quarter.
The SMESI, comprising the SME Business Activity Index (SME-BAI) and the SME Business Outlook Index (SME-BOI), is designed to capture the direction and momentum of business conditions in India’s SME manufacturing sector. An index value above 50 indicates expansion or a positive outlook, while a value below 50 indicates contraction.
SME Business Activity Index rises to 56.9
The SME Business Activity Index increased to 56.9 in Round 5, from 56.5 in Round 4, indicating a moderate improvement in business activity and continued expansion in the manufacturing SME sector during April–June 2026. The improvement was primarily supported by stronger output and production activity. The Output/Production Index increased to 61.7 in Round 5 from 60.0 in Round 4, indicating an expansion in domestic production activity.
New Orders remained at 58.3, indicating sustained demand compared with the previous quarter. At the same time, the Employment Index moderated marginally to 56.7 from 56.9, suggesting some softening in employment activity during the quarter.
The Supplier Delivery Times Index remained at 43.3, unchanged from the previous round, implying that delivery times remained broadly stable over the past six months. The Inventories Index also remained unchanged at 56.7, indicating broadly stable inventory conditions.
SME business outlook strengthens for July–September 2026
The SME Business Outlook Index (SME-BOI) increased to 59.3 for July–September 2026, from 58.7 in Round 4, signalling an improvement in business sentiment and a positive outlook for the next quarter. The survey indicates that 40% of respondents expect business activity to improve during July–September 2026, while 43% expect no change. On hiring, 30% of respondents anticipate an increase in hiring, while 47% expect no change in their hiring plans.
Capital expenditure intentions remain relatively stronger. Around 47% of respondents expect an increase in capital expenditure during July–September 2026, with the survey identifying government schemes and incentives supporting domestic manufacturing, including PLI schemes and MOOWR, among the factors driving these investment intentions.
Manufacturing SMEs maintain positive momentum
The Round 5 results show that the SME manufacturing sector continues to operate in an expansionary zone, with both the Business Activity Index and Business Outlook Index remaining comfortably above the neutral level of 50.
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