96% MSMEs in India optimistic about 2023, expect profits to rise: Report

Two in every three MSMEs expect the profit to jump by over 30 per cent: MSME Business Confidence Study

Ninety-six per cent of Micro, Small and Medium Enterprises (MSMEs) in India expect their profits to rise in 2023, a study released on Wednesday said. Out of these, two in every three MSMEs expect the profit to jump by over 30 per cent, it added.

According to MSME Business Confidence Study released by digital lender NeoGrowth showed that 75 per cent of MSMEs expect the consumer demand in India to rise in 2023. Only four per cent of those surveyed believed that the demand would fall. Industries from the retail and trading segment were the most optimistic.

Three out of four MSMEs in India were "confident" of India's growth in 2023, the study said.

Data from the Reserve Bank of India (RBI) showed that the average daily UPI and card spending was rising in India. From Rs 10,563 crore per day in October 2021, it rose to Rs 14,308 crore per day in October 2022. The GST collections too are picking up. In December, the total GST collections in India rose 15 per cent (year-on-year) to Rs 1.49 trillion.

"This is a healthy sign of the revenue of the MSMEs over the last few months and their economic revival and stability," the study said.

"Consumer confidence is yet to fully bounce back as revealed by industry data; however, the MSME respondents in our study are optimistic about the rising consumer demand in 2023," it added.

70 per cent of manufacturing and service sector MSMEs believe that their profit will jump over 30 per cent in 2023.

Moreover, the industry expects non-metro cities to outpace metro cities in credit demand. 84 per cent of MSMEs in non-metro cities are planning to opt for a business loan next year. This is accelerated mainly by rising working capital and expansion needs. The repo rate hikes in 2022 may not impact the credit demand.

"The credit demand expectations of MSMEs as per our study have come at a time when the repo rate increased by 225 basis points in seven months, which increases the cost of borrowing for MSMEs. However, given the expectations for strong consumer demand, that is unlikely to impact the MSME credit demand in 2023," it said.

The study further highlighted that 71 per cent of MSME owners plan to include Sustainable Business Practices in 2023. Not using plastic was the top initiative that the industry will carry forward in 2023. It is followed by the use of renewable energy and undertaking green initiatives like reducing carbon emissions and tree plantation.

"We believe that the strong digital ecosystem in India will be a catalyst for MSME lending in the coming year. MSMEs are capitalising on new credit options to build and scale their businesses easily, unimpeded by traditional methods of credit underwriting. 2023 will be a crucial year for MSMEs, which will play a pivotal role as India moves a step closer to realising its vision of a $5-trillion economy," said Arun Nayyar, managing director and CEO at NeoGrowth.