• 80% MSMEs see business improvement in the last few months
  • 1 in 2 MSMEs plan to take a business loan in 2026, signalling expansion led intent
  • MSMEs prioritise easier access to working capital, continued government support and digital capacity building from Budget 2026 

Mumbai : India’s MSME sector is showing early signs of revival, with a decisive improvement in business sentiment in the last few months. Nearly eight in ten MSMEs report better business performance in recent months, while confidence about 2026 has strengthened meaningfully, according to NeoGrowth’s latest NeoInsights report.

NeoGrowth, an SME focused NBFC in India, today released the tenth edition of its flagship NeoInsights report, the 4th edition of  MSME Business Confidence Study 2026, showing constructive optimism firming up after a period of caution, supported by strong festive sales, improved cash flow, and GST 2.0 benefits. Looking ahead, 86% of MSMEs expect their businesses to grow in 2026, signalling a shift from short-term recovery to medium-term confidence.          

The study was conducted among more than 2,000+ MSMEs across over 25 cities, capturing insights into recent performance, credit intent, and expectations for 2026.

Optimism Extends into 2026

Looking ahead, MSMEs are entering 2026 with constructive optimism. The study finds that 86% of MSMEs expect business growth in the coming year, supported by steady domestic demand and a relatively stable operating environment. Over 71% MSMEs studied are planning to expand their shop or open a new outlet, signalling strong confidence in scaling physical presence. Alongside this, 30% intend to add more products or brands, reflecting efforts to widen offerings and capture incremental demand.

City- and sector level trends show optimism is strongest in consumer facing segments, where demand visibility has improved. Top industries include beauty & wellness, automobile and food & beverage.

Budget 2026 Levers for Growth

As MSMEs look towards Budget 2026, expectations centre on measures that can reinforce operational ease and continuity. Businesses prioritise timely access to working capital, smoother and faster access to existing government schemes, all of which are seen as enabling smoother planning and execution as businesses scale. Around a quarter of MSMEs highlight the importance of faster and improved access to government schemes, alongside continued simplification of GST and compliance processes. In addition, a growing share of MSMEs recognise the role of digital tools and online payments in improving efficiency, transparency, and customer reach, underscoring the importance of continued digital enablement across the ecosystem.

Mr. Arun Nayyar, Managing Director and CEO, NeoGrowth, said: “The study points to early green shoots across the MSME sector. Festive demand, coupled with stronger digital payment adoption and GST 2.0 benefits has started to support business momentum. What stands out is the measured confidence among MSMEs, with growth plans.”

Festive Demand Strengthens Business Momentum

During the recent festive months, MSMEs across retail and service categories reported stronger consumer footfall and improved revenue. This festive-led uplift, supported by GST 2.0 rate rationalisation, helped ease pricing pressure across mass-consumption categories and contributed to better realised revenues.

Payment trends further reinforce the quality of this demand. Merchant led digital transactions recorded a sharp increase during the festive months, with UPI payments to merchants rising meaningfully in October. According to NPCI data, UPI processed a record ₹27.28 lakh crore across 20.7 billion transactions in October, driven by festive spending.  The acceleration highlights improved cash flow visibility for MSMEs, translating festive demand into actual business receipts.

Expansion Drives Credit Demand This confidence is increasingly translating into investment readiness. Over half of MSMEs surveyed indicated plans to take a business loan in 2026, primarily to support expansion, inventory build up, and working capital needs. Credit intent is seen to be more pronounced in categories such as electronics, mobile, and personal services, where borrowing is viewed as a strategic lever to scale operations.
At the same time, borrowing decisions remain closely linked to future plans, reflecting a cautious and considered approach to business expansion.

Overall, the findings point towards the MSME sector moving into 2026 with greater clarity and preparedness. While MSMEs remain mindful of operating conditions, improving demand visibility, stronger cash flow cycles, and a focus on capability led growth are shaping business decisions. As festive led momentum transitions into the new year, MSMEs appear increasingly positioned to convert near-term stability into sustained, long-term progress.