Bengaluru: Indian micro, small and medium enterprises (MSMEs) delivered their strongest business performance since the pandemic and continue to demonstrate exceptional confidence in future growth, according to CPA Australia’s Asia-Pacific Small Business Survey 2025/26.
The survey revealed that 80 per cent of Indian small businesses reported growth in 2025, significantly higher than the Asia-Pacific average of 63 per cent. Looking ahead, 87 per cent of respondents expect their businesses to grow in 2026, while 84 per cent anticipate expansion in the local economy, making India one of the most optimistic markets in the region.
According to the report, enhanced customer experience and increased technology adoption were among the key factors driving business growth during the year. However, rising operational costs remain a major concern, with 42 per cent of business owners identifying increasing costs as their biggest challenge. Material costs emerged as the most significant pressure point for the third consecutive year.
Aniket Talati, Certified Practising Accountant and CPA Australia spokesperson in India, said Indian MSMEs have demonstrated remarkable resilience and ambition, supported by strong domestic demand and favourable government policies.
“Indian MSMEs showcased impressive dynamism and confidence in 2025 and have entered 2026 with strong expansion ambitions. Government initiatives promoting structured business growth and free trade agreements are helping enterprises explore new opportunities and strengthen their market position,” he said.
The survey also highlighted the sector’s critical role in employment generation. More than half (52 per cent) of Indian small businesses increased employee numbers in 2025, while 69 per cent plan to expand their workforce in 2026. Notably, 56 per cent of business owners are below the age of 40, significantly above the Asia-Pacific average, reflecting the growing influence of young entrepreneurs in driving innovation and digital transformation.
India continues to lead the region in digital adoption. Nearly 89 per cent of surveyed businesses generated more than 10 per cent of their revenue through digital payments, while 74 per cent earned a significant portion of revenue through e-commerce platforms. Social media has become an integral business tool, with nine out of ten MSMEs actively using it for business purposes.
Artificial Intelligence (AI) is emerging as a major growth enabler. Investment in AI rose sharply from 26 per cent in 2024 to 36 per cent in 2025, making it the most popular technology investment among Indian MSMEs. Cloud computing and customer relationship management systems followed closely behind. Additionally, 41 per cent of respondents sought business advice from AI tools, compared to 25 per cent a year earlier.
The report noted that technology investments have improved profitability and accelerated innovation, with 44 per cent of Indian MSMEs planning to introduce new products or services in 2026, well above the regional average.
Despite rapid digitalisation, cybersecurity remains a growing concern. Nearly half of the surveyed businesses reported losing time due to cyber incidents during 2025, while 50 per cent believe they are likely to face a cyberattack this year.
Demand for external finance also remained strong. Four out of five Indian MSMEs sought external funding during 2025, primarily to support business expansion. More than half reported easy access to finance, indicating improving lending conditions. Banks continue to be the primary source of funding, supplemented by investors, family support and non-banking financial institutions.
Talati emphasised that strategic investment in technology, skilled talent and effective financial management will be essential for sustaining growth in an increasingly complex global business environment.
The survey was conducted by CPA Australia during November and December 2025 and gathered responses from 4,166 small businesses with fewer than 20 employees across 11 Asia-Pacific markets, including 513 respondents from India.