Indian MSMEs Post Strongest Growth Since Pandemic, Survey Finds

India’s small businesses recorded their strongest growth since before the COVID-19 pandemic in 2025, with eight out of 10 firms reporting expansion, according to a new survey by CPA Australia.

The survey found that 80 per cent of Indian small and medium enterprises (SMEs) grew during the year, significantly higher than the Asia-Pacific average of 63 per cent. Business confidence also remains robust, with 87 per cent of respondents expecting growth in 2026 and 84 per cent expressing optimism about the domestic economy.

However, rising operating costs continue to pose a major challenge. About 42 per cent of businesses identified increasing costs as their biggest concern, while material costs emerged as the most damaging factor for the third consecutive year.

Despite these pressures, Indian SMEs continue to expand their workforce. More than half of the surveyed businesses increased employee numbers in 2025, while 69 per cent plan to hire additional staff this year. The survey noted that India has one of the youngest small-business owner profiles in the region, with 56 per cent aged below 40.

Digital adoption remains a key growth driver. Nearly 89 per cent of businesses generated more than 10 per cent of their revenue through digital payments, the highest level among the 11 Asia-Pacific markets surveyed. E-commerce also played an increasingly important role, with 74 per cent of businesses deriving a significant share of revenue from online sales.

Artificial intelligence is gaining traction among Indian SMEs. The proportion investing in AI rose to 36 per cent in 2025, making it the most popular technology investment ahead of cloud computing and customer relationship management systems. More than four in 10 business owners said they used AI tools for business advice.

The survey also highlighted growing cybersecurity concerns. Nearly half of the respondents reported losing time due to cybersecurity incidents during the year, while 50 per cent believe they are likely to face a cyberattack in the coming months.

Access to finance improved during the year, with 80 per cent of businesses seeking external funding. More than half said obtaining finance was easy or very easy, reflecting improving credit conditions. Business expansion remained the primary reason for seeking funds, ahead of managing costs or maintaining operations.

According to the survey, 44 per cent of Indian SMEs plan to introduce new products or services in 2026, indicating continued confidence despite economic uncertainties and geopolitical risks affecting global trade.

The survey was conducted between November and December 2025 and covered 4,166 small businesses across 11 Asia-Pacific markets, including 513 respondents from India.