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A fifth of MSMEs will need more working capital this fiscal: Report

A fifth of MSMEs will need more working capital this fiscal: Report

MSMEs, accounting for 40% of India’s exports, will face headwinds from the imminent economic slowdown in advanced countries, particularly the US and Eurozone. These two geographies account for a third of India’s overall exports. An analysis by CRISIL MI&A Research, published in its biannual MSME Report, shows a fifth of the micro, small and medium enterprise (MSME) sector by value is expected to witness an increase in working capital requirement this fiscal, compared with the pre-pandemic (fiscal 2020) level.

These MSMEs are in sectors already grappling with high working capital requirements. On the other hand, sectors such as dyes and pigments, construction, gems and jewellery will see a material stretch in their working capital days.

Says Pushan Sharma, Director – Research, CRISIL Market Intelligence & Analytics, “In the Gujarat cluster, export-oriented MSMEs in Ahmedabad and Surat are expected to see their working capital days swell this fiscal compared with the pre-pandemic levels. The Ahmedabad cluster will see an increase of 20-25 days, driven by a rise in the working capital requirement of the dyes and pigments sector, and the Surat cluster by 35 days, driven by higher working capital requirement of the diamond exports sector.”

In the construction-roads sector, underachievement of budgeted capex last fiscal — to rein in fiscal deficit — has added to the challenges of developers in meeting working capital demand amid high commodity prices. This has led to an increase of more than 100 days in their working capital cycle this fiscal, compared with pre-pandemic levels.

PR Newswire

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