Price Rise: A key challenge for the MSMEs

A rise in the global commodity prices have had a direct impact on the Small businesses in our country. As for the centre, easing the global commodity prices bodes well for the economy and will have a positive impact on the current account deficit (CAD), especially from the perspective of protecting the interests of the MSME sector. A promising monsoon means half the battle is won, having a domino effect on the small businesses and on the Indian economy. The national government and the central bank have been exchanging information on external  factors such as monetary policy tightening and a potential recession in the United States on a regular basis, as a precaution to ensure that external factors do not harm the Indian economy.

Indian MSMEs have not been able to meet their revenue needs because of the buoyancy Goods and Services taxes (GST) in recent months. As for the State governments they too had to face challenges while making GST compensations. The number of items in the 28% GST slab, which attracts cess, has been reduced over time to make the tax less burdensome to the ultimate consumers. Easing the global commodity prices will be of immense relief to the central government as well as the Indian businesses, as in the recent months, several steps such as export control measures and import duty cuts to improve local availability and affordability of a host of items, including wheat, sugar, edible oils & fuel.

In the midst of disrupted global supply chains, India is relatively better placed than many other economies. Most Forex outgo is on account of items such as crude oil, fertilizers and excessive coal imports. As these comprise of the basic raw materials for a number of Small businesses, they have had to take a hit as a result of the price rise. Of late, an optimistic trend has been observed in the easing up of crude oil prices amid concerns of global recession and a fall in demand. The crude oil prices have been below the $100 per barrel mark. This is a significant drop from the highs in the past few months amid the Russia-Ukraine crisis. Fall in prices of basic raw materials, indicate an upward trend for the business activities and come as a sign of relief for the stressed Indian MSMEs.

Source : An article by Rituraj Baruah from The Mint newspaper