Executive Summary

The second quarterly CriSidEx survey shows micro and small enterprises (MSEs) had a better outing in SQ (survey quarter, or January-March 2018), driven by the manufacturing sector, compared with October-December 2017. That lifted the CriSidEx score to 121 from 107 in October-December, validating the prediction of higher optimism made by the first quarterly survey.

For NQ (the next quarter, or April-June 2018), expectations remain positive, with 51% manufacturers and 48% services providers anticipating a good outing.

Within manufacturing, chemicals, auto components, and engineering and capital goods-related MSEs reported strongly positive sentiment, while segments with a significant presence of unorganised enterprises such as leather & leather goods, and gems & jewellery were subdued. MSEs in auto components, chemicals, and engineering and capital goods were the most optimistic about NQ.

The services sector remains optimistic, with most industries having only a single-digit share of respondents expecting a turn for the worse. IT/ITeS, traders and health care providers had a healthy showing in SQ, but not so logistics and construction/real estate-based MSEs. Traders and health care providers were expected to continue doing well along with MSEs in human resource services.

In terms of legal constitution, companies were marginally more positive than firms, while unorganised players, or mostly micro enterprises with <10 employees, had a marginally larger share of respondents citing a subdued SQ. For NQ, too, a similar pattern is visible, with 53% of MSEs with >25 employees expecting a better ride versus 44% with <10 employees.

In terms of orderbook, around 46% of manufacturing sector MSEs reported an increase in SQ versus 31% for those in services. And 53% of manufacturing MSEs expect a better NQ compared with 48% from the services sector. On the other hand, industries with a large presence of unorganised players, such as leather products, gems & jewellery and food products, said orderbooks have fallen more, and expect a weaker showing in NQ.

As for international trade, only 21% of the export-oriented respondents reported an increase in orders, much lower than the 38% by domestic-focussed MSEs. For NQ, 34% of exporters foresee above-normal orders versus 51% of domestic MSEs. Importers expect more stability. Nearly 80% of the importer MSEs placed normal orders for imports from their suppliers, while 18% ordered for more. Going forward, too, less variation is expected among importers.

MSEs are expecting improvement in production over the next quarter with 56% of respondents expecting increased production and only 5% expecting it to be reduced. The balance 40% believe production will remain unchanged. On capacity utilisation, 46% of the respondents from the manufacturing sector expect an increase, 49% see no change, while the rest expect it to be lower.

New job additions remain flat. In SQ, nearly 81% of the respondents reported that their employee base remained unchanged, while 15% added more staff. The services and manufacturing sectors were optimistic on employment with 15% of respondents in each stating they added employees in SQ.

The employment scenario is expected to look up in NQ with 28% MSEs saying they intend to hire versus 4% foreseeing a reduction. The majority, or 68%, intend to continue with their current employee base with no net additions.