MSME shocked over hike in repo rate by 40bps: CICU
Today in a surprise media briefing at 2 pm, Reserve Bank of India announced that the repo rates have been hiked by 40bps to 4.40%.
cityairnews
May 4, 2022 05:20
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Ludhiana, May 4, 2022: Today in a surprise media briefing at 2 pm, Reserve Bank of India announced that the repo rates have been hiked by 40bps to 4.40%.
In the light of above it will adversely affect the MSME, which is already in stress. Interest cost for consumable durable, Two-Wheeler, Cars, Commercial Vehicles, etc of which 95% is sold by financing routes, rate rise will impact demand. Demand in above products is already low compared to previous years. Post Covid the Market has not recovered and low demand will further effect sale dip for MSME.
The inflation being the primary reason for rise in Repo rates. Hike in Raw material & Commodity prices, Russia-Ukraine war, Covid sentiment in China and other countries has created scarcity of metals, minerals etc. Import Export effected due to un-availability of containers.
MSME is largely dependent on Finances from Banks and other financial institutes. MSME got financial support under Emergency Credit Line Guarantee Scheme (ECLGS) scheme. Rise in Interest rate will adversely affect the MSMEs and the profitability of MSME will be reduced. 60% of MSMEs are already in stress.
Sensex and Nifty has also down by 3%, which indicates the investor confidante are unhappy too.
Chamber of Industrial & Commercial Undertakings (CICU), Ludhiana in its letter to Union Finance Minister Nirmala Sitharaman and Union Minister of Commerce & Industry Piyush Goyal urged that rather than to increase rate of interest to temporary curb demand, steps should be taken to reduce prices of steels, raw material, commodities like Zinc, Nickels, Yarn, Fuel etc. to bring down inflation rates.
This information has been given by CICU president Upkar Singh Ahuja in a statement here today.
