(MENAFN- KNN India)
New Delhi, Jun 15 (KNN)
As India gears up for the festive season in 2024, micro, small, and medium enterprises (MSMEs) are poised for increased sales but continue to grapple with working capital shortages, according to a recent report by KredX, an Indian supply chain finance platform.
The report projects that 40 to 50 per cent of the working capital demand during the pre-festive period will originate from tier two and three cities in Gujarat, Maharashtra, and Uttar Pradesh.
Simultaneously, tier-one cities such as those in Maharashtra, Tamil Nadu, Telangana, Karnataka, and Delhi NCR are expected to drive 20-30 per cent of the demand.
Despite festive sales being a vital revenue stream for MSMEs, particularly those in manufacturing, e-commerce, and logistics, limited access to short-term credit remains a significant growth barrier.
The report underscores that capital requirements for Indian businesses are anticipated to remain high as they pursue capacity expansion and inorganic growth.
E-commerce is identified as a key driver of demand, with consumer appliances, fashion, apparel, and fast-moving consumer goods (FMCG) leading the growth.
The sector now reaches over 20,000 pin codes, resulting in increased working capital needs. Notably, Kolkata and Hyderabad have seen a 200 per cent growth in e-commerce, while Chennai, Mumbai, Delhi, and Bangalore report 100-150 per cent growth.
Tier two and three cities in Telangana, Uttar Pradesh, and Andhra Pradesh are experiencing over 500 per cent growth.
In the manufacturing sector, commodities such as electronics, automotive, engineering, and chemicals are expected to see a 50-60 per cent increase in working capital demand.
Ahmedabad leads tier-one cities with a 200 per cent growth rate, followed by Mumbai, Kolkata, Chennai, and Bangalore.
Tier two and three cities in Delhi NCR, Tamil Nadu, Chhattisgarh, Uttar Pradesh, and Jharkhand are projected to have a 500 per cent growth rate.
Manish Kumar, Founder and CEO of KredX, stated, "The festive season is critical for Indian businesses, especially MSMEs. We anticipate a 200 per cent increase in working capital demand in tier two and three cities, signalling a strong need for intervention."
The report attributes the high capital requirement to the need for expanded capacity in response to robust consumption growth, driven by India's increasing population, rising incomes, and growing urbanisation.
While the festive season presents significant opportunities, the persistent challenge of accessing working capital continues to impede the growth potential of Indian MSMEs.
(KNN Bureau)
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