A quick survey covering 1000 SMEs undertaken by ASSOCHAM has unanimously stated that the increased interest rates consecutively for 12 times have thrown many SMEs out of business and others are on the brink of being out of business. There was utter disappointment and 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.
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.
Consequently, SMEs have shared that there has been a decline of around 15% market share of SMEs, 20% in their profit margins and 24% reduction in total production capacity, which are serious subjects.
Releasing the survey the Chamber spokesman said the RBI weapon of increased key rates though goes well for attempting to rein in 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.
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 said that the chamber secretary general Mr DS Rawat was drawn from manufacturing as well as ancillaries of the automotive sector including export units. All most 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.
They also showed deep dissatisfaction on the way the government has failed in combating inflation as well as controlling cost of capital. Few of the larger SMEs , however, cautioned that henceforth ,their capacity to absorb the increased input costs may be eroded and face falling top line and compressed or bottom line. The SMEs slipping into red seems certain though with caution.
Therefore, ASSOCHAM Survey has revealed the serious undercurrent of the financial position and its impact on the rising cost of funds, consequent upon undeterred hike in key policy rates of RBI, affecting one of the most important sectors of the economy the SMEs. ASSOCHAM strongly advocates and suggests milder dispensation for the economy with larger focus on fiscal measures coupled with strengthening of supply side constraints and expanding the economy with adequate, affordable and timely credit dispensation for the SMEs the life line of the roaring economy.
(Sourced from www.orissadiary.com)
