Paper Title: The Operational Lifeline: An Analysis of the Importance of Working Capital in the Functioning of Firms in India
Author:
Abstract:
Working capital management (WCM) represents the heartbeat of corporate finance, governing the day-to-day operational liquidity required to sustain business activities. In the context of India, a developing economy characterized by rapid growth, infrastructural transitions, and unique market dynamics, the efficient management of working capital is not merely a financial strategy but a prerequisite for survival. This research paper investigates the critical importance of working capital in ensuring the smooth functioning of firms in India. Through a comprehensive review of existing literature, analysis of sector-specific challenges, and examination of macroeconomic factors, this study elucidates how working capital components—inventory, receivables, and payables—impact profitability and solvency. The paper further explores the role of digitalization, the Goods and Services Tax (GST), and the "Make in India" initiative in reshaping working capital cycles. The findings suggest that while aggressive working capital policies can enhance profitability, they must be balanced against liquidity risks, particularly in an economy where external financing channels remain volatile.
Keywords:Working Capital Management, Indian Corporate Sector, Liquidity, Profitability, Supply Chain, GST, Digitalization.
DOI Link – https://doi.org/10.63431/AIJITR/3.I.2026.14-22
Review By – Dr. Sanjay Sarkar and Dr. Chandan Mandal, Dr. Amit Adhikari