Small businesses in India delivered their strongest performance since 2019 in 2025, even as rising costs remained the key challenge, according to the CPA Australia Asia-Pacific Small Business Survey 2025-26. Material costs emerged as the top concern for the second consecutive year, as per the survey.
In another positive outcome, the survey revealed that 80% of Indian small businesses witnessed growth last year, surpassing the Asia-Pacific average of 63%.
The survey, conducted between November and December 2025, included 4,166 small businesses across 11 markets—India, Australia, Chinese Mainland, Hong Kong, Indonesia, Malaysia, New Zealand, Philippines, Singapore, Taiwan, and Vietnam. As many as 513 respondents from India, including the cities of Delhi, Mumbai, Chennai, Bengaluru, and Hyderabad, participated in the survey.
Going forward, while 87% of the participants expect their business to grow in 2026, 84% anticipate growth in the local economy, outperforming regional peers and reinforcing India’s position as one of the most upbeat small business markets in the region.
The survey showed customer loyalty/improved customer satisfaction, technology/improved business strategy, and good staff as the top three growth drivers for small businesses in India; and rising costs, increasing competition, and cash flow difficulties as the top three challenges.
Despite the strong sentiment, cost pressures remained the most significant headwind. The survey showed that 42% of respondents cited increasing costs as their biggest challenge in 2025, with material costs—including staff, taxes, utility costs, and rent—detrimental to their businesses.
Aniket Talati, Certified Practising Accountant and CPA Australia spokesperson in India, cautioned that the operating environment is becoming increasingly complex. “Rising geopolitical uncertainty since March has added volatility to the business environment. While the service sector remains largely unimpacted, manufacturing and export-oriented MSMEs are facing multiple pressures, including higher energy and logistics costs, rising raw material prices, and uncertain order pipelines,” he said.
Regarding artificial intelligence (AI), the survey stated that investment in it increased significantly. The proportion of Indian small businesses investing in AI rose from 26% to 36% in 2025, making it the top technology investment, the survey said.
“Some key drivers for high AI adoption in India include a younger average age of business owners and fewer inhibitions regarding privacy, making Indian MSMEs more receptive to new technologies compared to global counterparts. However, MSMEs must embrace AI with sufficient guardrails and data protection awareness,” said Talati.
From an employment standpoint, Indian MSMEs continued to play a vital role in job creation, supported by a new generation of younger business owners emerging as a powerful driver of growth and transformation across the sector. The survey showed that 52% of Indian small businesses increased their employee numbers in 2025, and 69% plan to increase their headcount in 2026, outpacing many regional peers.
