Rising Input Cost and Liquidity Crunch – Hurdles for Growth of SMEs

According to the survey conducted by Indiamart.com (web portal of SMEs), increasing input costs and liquidity crunch are becoming barriers for growth of SMEs, especially for those involved in apparel business.

According to the survey, over 50% of the respondents participated in the survey reported significant increase in input costs. The survey also said that liquidity crunch is restricting growth of the sector. This is because funds are required by the firms to grow the current business to make entry into international markets and to invest in research and development. According to experts, continuous monetary tightening by the Reserve Bank of India is one of the reasons for liquidity crunch in the market.

It was also found that small and medium enterprises are finding it difficult to get credit from banks easily and at affordable rates. Adopting new technology or upgrading existing technology will cut the costs and increase the business operations.

Indian SMEs are playing a major role in country’s economic growth. The Micro, Small and Medium Enterprises are contributing over 40% to the India’s total exports, 45% to manufacturing output and 8% to the country’s GDP. This sector provides employment for about 60 million people.

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