India's MSMEs: China+1 Opportunity Meets Rising Cost Squeeze

Indian micro, small and medium enterprises face a dual challenge from geopolitical conflicts and shifting supply chains. The China+1 strategy opens a window for export growth. Rising input costs and an uncertain trade environment are squeezing margins, Sachin Gupta, chief rating officer at Care Ratings, said in a discussion with ET Digital.

The push by global companies to reduce dependence on Chinese manufacturing has created a potential market for Indian MSMEs. The opportunity is real. It is not automatic, Gupta said. Sectors with high import content and low pricing power are under the most strain. Manufacturing and textiles are among those most exposed, he noted.

Policy support will determine whether MSMEs can capitalize on the shift. Credit access and infrastructure are the two areas that matter most, Gupta said. Without easier credit, many companies cannot invest in capacity to meet export orders. Without better logistics, cost advantages erode. The next 12 to 18 months are critical for companies to adapt their supply chains and cost structures.

Gupta said the ability to manage rising costs and meet evolving export demand will separate the winners from the rest over the next year. Companies that adjust now can capture market share from Chinese rivals. Those that delay may lose out as global buyers lock in new suppliers.

For a broader view of how supply chain shifts affect listed companies, see AlphaScala's stock market analysis.