Economist warns MSMEs working capital to worsen if inflation remains in double-digit
Mumbai, May 20 (KNN) During a joint discussion by WTC Mumbai and All India Association of Industries (AIAI) on Thursday, Dr. Madhavan Kutty, Senior Economist, Aditya Birla Group, Mumbai said that working capital of Indian MSMEs would deteriorate further if the wholesale price inflation continues to remain in double digit.
“MSMEs are badly hurt by rising commodity prices,” he added speaking at a panel discussion on ‘Impact of commodity price inflation on MSMEs’.
Dr Kutty stated that prolonged periods of high inflation will erode the profit margin of large corporate buyers, who will in turn delay their payments to their MSME vendors.
He called upon banks and NBFCs to support MSMEs to navigate through this challenging time.
Lenders must increase the credit flow to MSMEs and shed their risk aversion, he said.
Citing an example of commodity inflation, Avinash Misar, Director & CEO, Advanced Material, Texport Syndicate India Ltd & VC, Indian Tech Textiles Association said, “Indian textile industry is badly affected by rise in cotton prices as 75 per cent of downstream industry produces cotton garments and only 25 per cent produce man-made fibre garments.”
Cotton prices have risen three times more than the growth in general inflation and MSMEs are unable to pass on this cost inflation as they have entered into long term agreements with foreign buyers, Misar said. (KNN Bureau)