MSMEs from Amritsar hit by rising interest rates and high inflation

Border district-based Micro, Small and Medium Enterprises (MSME) have been grappling with difficult circumstances in the wake of interest rate hike following the rise in repo rate by The Reserve Bank of India (RBI).

When the market is hit by inflation, RBI increases the repo rate. An increased repo rate denotes that the banks who borrow money during this period from the central bank will have to pay higher interest. This discourages the banks to borrow money, which in turn, reduces the supply of money in the market and helps negate the inflation.

The RBI hiked the repo rate by 1.4% in the last four months, upsetting our business calculations. The interest rate of advances taken by MSMEs has become expensive, which is directly increasing input cost of products being rolled out of these units, Piara Lal Seth, president of the Punjab Pradesh Beopar Mandal (PPBM)

The interest rate of advances taken by the MSMEs has become expensive, which is directly increasing input cost of products being rolled out of these units. The MSME sector was already passing through an existential crisis due to hike in raw material, fuel cost, cargo cost and other factors emanating out of the Covid-19 pandemic, he said. On the other hand, the rise in food inflation has reduced the paying capacity of consumers.

The government should take immediate cognizance of the MSME sector and announce a special relief to bail it out from the interest rate hike. It will pave the way for acceleration of industrial activities, said Sunil Mehra (PPBM)

He demanded that 2% interest subsidy to the MSMEs must be implemented to provide a solace to the sector which offers maximum employment to industrial labourers.

Source : Tribune India