A worker manufactures a lock at a workshop in Aligarh, Uttar Pradesh, India. (Photographer: Udit Kulshrestha/Bloomberg)

Small Businesses Remain Upbeat On Growth Prospects

Small businesses continue to remain upbeat about their growth prospects led by gains in the manufacturing sector.

The CriSidEx Index, which measures the business sentiment among micro and small enterprises, rose to 121 in the January-March quarter, according to a statement by the Press Information Bureau. That compares with 107 in the three months ended December—its first reading that had indicated a mildly positive sentiment.

India’s small businesses struggled following demonetisation and then the implementation of Goods and Services Tax. Particularly the ones in the informal economy as the cash ban hurt consumption and then GST increased compliance burden. The sentiment has started improving gradually.

“Micro and small enterprises in manufacturing are slightly more optimistic than their services sector counterparts,” said Crisil Chief Executive Officer and Managing Director Ashu Suyash. In terms of order book, production and capacity utilisation, they expect the situation to improve further in April-June, he said.

Within manufacturing, chemicals, auto components, engineering and capital goods-related-small enterprises reported a better January-March period and are the most optimistic about the ongoing quarter. Segments with a significant presence in unorganised enterprises such as leather and leather goods, and gems and jewellery remained subdued, the statement said.

The feedback was captured through a survey of 1,100 micro and small enterprises across India and sectors.

Information technology and IT-enabled services, traders and healthcare providers had a healthy March quarter and are expected to continue doing well, but that is not so with logistics, construction and real estate-based businesses.

Other Highlights

  • Unorganised small businesses reported a slight improvement in performance.
  • Lenders hold a ‘Neutral’ view for the June quarter, with 9 of the 10 saying the overall business situation will be satisfactory.
  • As many as 7 of the 10 lenders did not find any change in the NPA situation of such enterprises in the March quarter.

The index, developed jointly by Crisil and SIDBI, is based on a diffusion index of eight parameters, which takes into account five manufacturing and three services that have equal weights.