'Rates hike have thrown SMEs out of business'

NEW DELHI, INDIA: The Associated Chambers of Commerce and Industry of India (Assocham) conducted a survey covering 1,000 small and medium enterprises (SMEs), which are of an opinion that 12 consecutive increase in interest rates have thrown many SMEs out of business and others are on the brink of it.

There was serious concern over the RBI’s continued strategy of increasing lending rates without attempting to address the issues of high credit cost to the SME sector, the survey said.

Some of the respondents even echoed with apprehension that increased cost of inputs may affect their ability to service loans/interest commitments and may be a major factor for increased NPAs of banks. The serious note directs that the condition as well as the capability of SMEs continue to be challenged and any further hike in interest rates will debilitate their already fledging financial position.

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Consequently, SMEs have shared that there has been a decline of around 15 per cent market share of SMEs, 20 per cent in their profit margins and 24 per cent reduction in total production capacity, which are serious subjects.

Releasing the survey the Chamber spokesman said though the increase in key rates will help in reining inflation with growth a not so important idea, the impact on overall survival of SMEs have been very serious and alarming.

The continued increased fuel prices, ever increase in lending rates are the worst hit and could be heading for a serious trouble.

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On the various parameters of production targets, market competitiveness, job loss, squeezed margins, already very high cost of funds, non-implementation of various Task Force recommendation, lack of export intelligence, growing tax liability, uneven playing field in respect of tax concessions and a host of other issues, RBI increased thrust on inflation control by hiking cost of funds, have received a thumps down reaction from SMEs who feel isolated in their war of survival.

Majority of the respondents says the chamber Secretary General D.S. Rawat was drawn from manufacturing as well as ancillaries of the automotive sector including export units. Almost all of them expressed deep anguish that the steps taken by the authorities seems to retard the growth of this highly vulnerable sector and government should address these issues by fiscal measures including incentives for the SME sector and not alone by monetary instances of RBI.