Indian SMEs in a Disadvantageous Position Due to the Hike in Fuel Prices

The fuel rate hike will increase the sufferings of the small and medium sized businesses in the country because rise in prices of diesel and kerosene will increase the cost of inputs. Most of the small businesses face frequent power fluctuations in industrial areas. Hence, they most use diesel as an alternative fuel for power generation. Thus, the rise in fuel prices indirectly leads to the increase of input costs. Further, there will be more inflationary pressure since logistic and transport costs will increase because of the fuel prices hike. All these increasing cost factors will put SMEs in a more disadvantageous position.

At the same time, the rising inflation has already taken its toll on SMEs in terms of increasing in interest cost and higher cost of raw material. Even India’s largest bank “State bank of India” has projected low credit growth as most of the businesses are in the stages of becoming non-existent and cannot afford to pay the loan amount.

RBI (Reserve Bank of India) is trying to control the inflation by increasing interest rates. But there is no impact as the rate of inflation still continues to be around or more than 9%. Hence, the present situation is not well for growth of SMEs in the country.

Source: Trade India

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