NEW DELHI: The imminent economic slowdown in advanced countries, especially the United States and the Eurozone, will pose challenges for micro, small, and medium enterprises (MSMEs) in India, which account for 40 percent of the country's exports, as stated in a research report by Crisil.

These two regions together contribute to one-third of India's total exports. Crisil's biannual MSME Report highlights that approximately one-fifth of the MSME sector, in terms of value, is expected to experience an increase in their working capital requirement in the current fiscal year compared to the pre-pandemic period of fiscal year 2020. These MSMEs belong to sectors that are already grappling with high working capital requirements.

Conversely, sectors such as dyes and pigments, construction, gems, and jewelry will encounter a significant extension in their working capital days.

According to Pushan Sharma, Director of Research at CRISIL Market Intelligence & Analytics, export-oriented MSMEs in Ahmedabad and Surat, which are part of the Gujarat cluster, are anticipated to witness an expansion of their working capital days in the current fiscal year compared to the pre-pandemic levels. 

The Ahmedabad cluster is projected to have an increase of 20-25 days, driven by a rise in the working capital requirement of the dyes and pigments sector, while the Surat cluster is expected to face an increase of 35 days due to higher working capital requirements in the diamond exports sector. 

In the construction-roads sector, the underachievement of budgeted capital expenditure in the previous fiscal year, aimed at curbing the fiscal deficit, has added to the challenges faced by developers in meeting the working capital demand amidst elevated commodity prices. Consequently, there has been an increase of more than 100 days in their working capital cycle in the current fiscal year compared to the pre-pandemic levels.

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