Mumbai: President of the IMC Chamber of Commerce and Industry, Prof. Mahendra Kumar Chouhan, said on Wednesday said that the Reserve Bank of India’s 25-basis-point repo rate hike to 5.5 per cent is likely to raise the cost of doing business, particularly for SMEs and MSMEs, and urged the central bank to adopt a measured stance amid other underlying strengths in the economy.
Chouhan said the chamber appreciated the concerns underlying the RBI’s decision, noting that the rate hike was broadly along expected lines. However, he said the RBI’s decision to take rate cuts off the table was a matter of concern for businesses.
He said the IMC Chamber has companies of different sizes as its members, with a predominant presence of SMEs and MSMEs, which are likely to feel the impact of higher borrowing costs significantly. He appealed to the RBI to maintain a measured approach, pointing to several other strengths in the Indian economy.
On the government’s Rs 10,000 crore SME Growth Fund, Chouhan said the initiative would help address the funding gap faced by SMEs. Referring to SIDBI estimates, he said the funding gap for the sector is around Rs 30 trillion.
According to Chouhan, the fund could support SMEs in modernising their operations, gaining access to better technology, improving productivity and exploring new markets. He said the initiative would provide an overall boost to the growth prospects of SMEs.
Chouhan also highlighted the potential benefits of India’s recently signed free trade agreements. He said the Commerce Ministry had signed almost nine FTAs in the recent past, which cumulatively could open access to markets worth around $60 trillion.
He said these agreements could provide Indian MSMEs with opportunities to establish business alliances with companies in the UK, European Union, UAE and other countries covered under the FTAs.
Chouhan said access to the SME Growth Fund, combined with opportunities emerging from the FTAs, could enable MSMEs to invest in better technology and improve their production processes. This, in turn, could help raise productivity and strengthen the ability of Indian SMEs to compete in international markets.
(IANS)
