3 out of 4 MSME owners confident of India’s economic growth in 2023
75% MSMEs expect consumer demand to surge
71% MSME owners plan to include sustainable business practices
60% MSME owners plan to step up Technology/Digital Investments in 2023
Chennai outperforms other cities in business optimism parameters
Bengaluru, January 5, 2023: Ninety-six per cent of MSMEs expect profits to increase in 2023, an MSME Business Confidence Study released today by NeoGrowth, an MSME-focused digital lender in India, indicates.
The MSME Business Confidence Study was conducted nationwide with responses from close to 3,000 MSME owners. The study covered the expectations of India’s MSME owners across 25+ cities and 70+ business segments, as they step into 2023 amidst global volatility.
Arun Nayyar, Managing Director and CEO, NeoGrowth, said, “It is heartening that MSMEs are confident about their growth, profitability and other business indicator. 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.”
Sentiment of optimism among MSMEs
The optimism among MSMEs, India’s economic backbone, is an encouraging sign in these uncertain times. Three out of four MSMEs, who were a part of the study, were confident of economic growth in 2023, 20% were neutral and only 5% were negative. Among the respondents, 80% of women MSMEs from the manufacturing and services sector said they were optimistic about India’s economic growth.
MSME consumer demand
Seventy-five percent of MSME owners expected an increase in consumer demand in 2023, 21% of MSME owners felt it would remain the same and only 4% of MSME owners anticipated that it would decrease. MSMEs from Chennai recorded the highest optimism with around 86% expecting growth, followed by 83% in Hyderabad and 81% in Mumbai.
In terms of industry segment, MSME owners in the retail and trading segment said they were positive about witnessing a strong consumer demand in 2023. Women-led MSMEs from the trading and wholesale industry anticipated a healthy consumer demand in the coming year compared to other respondents.
Expectations for business profitability
Ninety-six percent of MSMEs expected their profits to increase in 2023; out of these, 66% anticipated profits to rise by over 30%, while 30% of MSMEs felt that it would increase by less than 30%. Only 4% of MSMEs expected business profitability to decrease.
MSMEs in Chennai were most confident about profitability in 2023 with 80% expecting an over 30% increase in profits. In contrast, the profit expectations of MSME owners in Mumbai and Pune were more conservative.
Non-metro MSME credit demand
Eighty-four percent of MSMEs in non-metros, largely bucketed under ‘others’ in the study, said they planned to opt for business loans in 2023. The accelerated demand for credit from smaller cities signalled MSMEs’ business recovery, as they require funds for their working capital needs, growth and expansion.
The manufacturing and services industry segments anticipated higher credit demand. Over 80% of women MSME owners expected to opt for a business loan in 2023. Given the expectations of a strong consumer demand, the repo rate increase by 225 basis points since early 2022 was unlikely to impact the MSME credit demand in 2023.
Openness to digital adoption
Sixty percent of MSME owners said they planned to step up technology or digital investments in 2023. The willingness for digital adoption was clearly evident with 38% of MSMEs saying they would focus on online selling, 23% planning to build a social media presence, and 24% of MSMEs desiring to digitise their accounts and payments to track cash flows in 2023.
Sixty-one percent MSME owners said they intended to expand their workforce in 2023 with higher hiring expected in the services and manufacturing industry segments. Three out of four Chennai-based MSMEs planned to hire more employees in 2023, the highest in the country.
Focus on sustainability
Seventy-one percent of MSME owners hoped to include Sustainable Business Practices in 2023. The topmost sustainable business practice favoured by MSMEs was to eliminate plastic usage. Sustainable business practices include initiatives around energy conservation/ renewable energy, tree plantation, reducing carbon emissions, reducing plastic and paper usage & controlling/ reducing air/ water pollution.