There was a moderation in sentiment among micro and small enterprises (MSEs) during the quarter ended March 31, 2019, the 6th CriSidEx survey shows.

At 122, the CriSidEx score for January-March 2019 was lower than the 128 seen in October-December 2018, but marginally up from 121 a year back.

At a parameter level, the share of positive respondents in manufacturing remained steady while the services sector reported a small increase in order-book size. Both sectors reported a decrease in the share of positive respondents in employee base compared with the previous quarter.

Says Mohammad Mustafa, Chairman and Managing Director, SIDBI, “On a year-on-year basis, MSEs operating in the leather & leather goods, chemicals, pharmaceuticals, IT/ITeS, and human resources segments reported a noticeable increase in positive sentiment, while those into gems & jewellery, textiles, auto components and health care had a relatively subdued outing.”

Among manufacturing MSEs, 42% reported a good survey quarter, which is on a par with the quarter immediately preceding. And 39% of services providers reported a good quarter compared with 41% in the previous quarter. The number, however, was better than the 29% in the same period a year ago.

Says Amish Mehta, Chief Operating Officer, CRISIL Ltd, “Sentiment in the March quarter was shaped by a host of factors such as slowdown in auto sales leading to inventory pile-up and production cuts by the automobile industry; slower tendering/awarding ahead of elections affecting the engineering goods sector; and, regulations impacting logistics.”

In the April-June 2019 quarter, sentiment about the business situation is expected to remain positive but the share of respondents expecting a good next quarter is the lowest in all six CriSidEx surveys so far.

Larger MSEs had a better survey quarter – as many as 47% of them with more than 25 employees compared, with 30% with less than 10 employees.

Export-oriented MSEs fared better than their domestic peers, with 45% reporting an increase in order book compared with 43% of domestic peers. In the past two quarters, exporters have been consistently faring better than domestic market-focused MSEs. Among importers, the share of respondents that saw higher procurement in January-March 2019 declined to 17% from 25% in the preceding quarter.

In terms of production volume, 43% of manufacturing MSEs reported an increase, which is a continuation of the trend seen in the previous quarter. A similar share of manufacturing MSEs expect an increase in production in April-June, while only 8% expect it to be lower.

MSEs said they expected to hire more in April-June with 18% respondents planning to add employees compared with 11% that did in January-March.

As for lenders, they remain cautious on the evolving business situation.