Indian SMEs Hit Strongest Growth Since COVID: CPA Australia

Indian Small Companies Reach Peak Recovery

Indian small and medium enterprises (SMEs) are experiencing their strongest growth trajectory since the COVID-19 pandemic struck, according to a recent CPA Australia survey. The findings underscore a broader recovery narrative in India's entrepreneurial landscape, where smaller companies—traditionally engines of employment and innovation—are demonstrating renewed vigour in expanding operations, hiring talent, and boosting revenues.

The survey data captures a critical moment in India's economic cycle. After weathering lockdowns, supply chain disruptions, and demand shocks during 2020 and 2021, small companies are now navigating a more stable operating environment. This rebound matters because SMEs employ millions of Indians and contribute substantially to GDP, making their health a barometer for grassroots economic momentum.

What the CPA Australia Survey Reveals

CPA Australia, the professional body representing accountants and finance professionals across the Asia-Pacific region, conducted a survey measuring growth sentiment and performance metrics among Indian business owners and financial decision-makers. The results show optimism outpacing caution—a shift from the uncertainty that dominated 2021 and early 2022.

The survey specifically highlighted that growth rates among respondent companies have rebounded to levels not seen since before the pandemic. This recovery spans multiple dimensions: revenue expansion, capital investment, workforce growth, and technology adoption. The breadth of the improvement suggests that recovery is not concentrated in a handful of sectors but is spreading across the small business economy.

Key drivers of this growth include:

• Increased domestic demand as consumer confidence recovers
• Pent-up investment appetite following the pandemic pause
• Government initiatives supporting SME financing and digital transformation
• Operational efficiencies gained through forced adoption of digital tools during lockdowns
• Export opportunities in select sectors as global supply chains rebalance

Sector-Wide Momentum and Regional Variation

Growth Across Industries

The recovery is not uniform. Manufacturing, services, and retail sectors show particularly robust expansion, with companies reporting month-on-month and year-on-year revenue growth. E-commerce and digital services businesses, which benefited from pandemic-driven shifts in consumer behaviour, have sustained momentum. Even traditional sectors like wholesale distribution and hospitality—hit hardest during lockdowns—are logging strong rebound numbers as restrictions have fully lifted.

Hiring and Skills Investment

Accompanying revenue growth is a hiring surge. Small companies are expanding payrolls, indicating confidence in sustained demand and long-term business stability. Beyond recruitment, businesses are investing in upskilling existing staff, particularly in digital literacy and data analytics—skills now viewed as non-negotiable even for small operations.

Challenges Tempering Optimism

Despite the positive survey outcomes, Indian SMEs continue to face headwinds. Inflation, especially in energy and raw material costs, is squeezing margins. Many small companies reported input cost increases outpacing their ability to raise selling prices, particularly in competitive segments. Access to working capital, though improved, remains a constraint for expansion-stage companies seeking loans without collateral.

Additionally, regulatory compliance and tax administration complexities persist as friction points. While GST simplification has helped, smaller enterprises often lack dedicated finance teams to navigate evolving compliance requirements. Cybersecurity vulnerabilities also loom larger as digital adoption accelerates without commensurate investment in IT security infrastructure.

Implications for Policy and Investment

The CPA Australia findings have policy relevance. They suggest that targeted government support—credit guarantee schemes, skill development programs, and regulatory simplification—can meaningfully amplify SME growth. The Reserve Bank of India's priority sector lending norms and various state-level startup ecosystems are showing dividends.

For investors and larger corporates, the survey signals a maturing SME sector increasingly worthy of partnerships and acquisition interest. Private equity and venture capital firms have already begun scouting high-growth small companies in technology-enabled services and advanced manufacturing. The CPA data lends empirical weight to this investment thesis.

For individual business owners, the moment represents both opportunity and urgency. Competitive intensity is rising as confidence spreads and new entrants emerge. Companies that invest aggressively in technology, talent, and brand positioning now are likely to consolidate market share. Conversely, those that remain complacent risk losing ground to more ambitious peers.

Looking Ahead

The CPA Australia survey captures a decisive inflection point. Indian small companies, having survived a existential test, are now thriving. This recovery, if sustained, can lift rural and urban micro-economies, generate employment, and build a resilient entrepreneurial base less dependent on a handful of large corporations.

However, growth at this pace requires consistent policy support, affordable credit, and macro stability. Any sharp rise in interest rates, sharp rupee depreciation, or external demand shock could disrupt the momentum. Policymakers and business leaders alike must treat this period of expansion as a window to build structural resilience.

The narrative is clear: Indian SMEs are no longer in recovery mode—they are in growth mode. That shift, validated by CPA Australia's data, reshapes expectations for India's economic trajectory over the coming two to three years.