96% of MSMEs expect profit to increase in 2023: Report

Nearly 75% of MSMEs expect consumer demand to surge, and 80% of women MSMEs were optimistic about India’s economic growth.

96% of MSMEs expect profit to increase in 2023: Report

Wednesday January 04, 2023,

3 min Read

About 96% of Indian MSMEs expect profits to rise in 2023, according to a study by NeoGrowth Credit. The MSME Business Confidence Study covering over 25 cities and nearly 70 business segments revealed that three out of four MSMEs who participated were confident of economic growth in 2023.

According to the study, 75% of MSMEs expect consumer demand to surge, and 80% of women MSMEs were optimistic about India’s economic growth.

“It is heartening that MSMEs are confident about their growth, profitability, and other business indicators. We believe that the strong digital ecosystem in India will be a catalyst for MSME lending in the coming year,” said Arun Nayyar, CEO and Managing Director of NeoGrowth, an MSME-focused digital lender.

“MSMEs are capitalising on new credit options to build and scale their businesses easily, unimpeded by traditional methods of credit underwriting,” he added.

According to the report, only 5% of MSMEs were apprehensive about economic growth in 2023. In these uncertain times, optimism among MSMEs, India's economic backbone, is a positive indication, the report added.

Expectations for business profitability

Out of 96% of MSMEs that expected their profits to increase in 2023, 66% anticipated profits to rise by over 30%, while the rest felt it would increase by less than 30%. Only 4% 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.

MSME consumer demand

Only 21% of MSME owners felt the demand would remain the same and 4% anticipated it would decrease. Chennai-based MSMEs recorded the highest optimism with around 86% expecting growth, followed by 83% in Hyderabad, and 81% in Mumbai.

In terms of the industrial segment, MSME owners in the retail and trading sectors expressed optimism about increasing customer demand in 2023. Women-led MSMEs in the trading and wholesale business predicted a healthy consumer demand in the coming year. 

Non-metro MSME credit demand

84% of MSMEs in non-metros said they planned to opt for business loans in 2023. The accelerated demand for credit from smaller cities signals MSMEs’ business recovery, as they require funds for their working capital needs, growth, and expansion, the report said.

The manufacturing and services industry segments anticipated higher credit demand, and 80% of women MSME owners expect to opt for a business loan in 2023. 

Openness to digital adoption

60% 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% saying they would focus on online selling, 23% planning to build a social media presence, and 24% desiring to digitise their accounts and payments to track cash flows in 2023.

Employment generation

61% of MSME owners intend 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

71% of MSME owners hoped to include sustainable business practices in 2023. The most popular sustainable business practice among MSMEs was the elimination of plastic use.

Edited by Suman Singh

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