Renewed US-Iran Tensions May Raise Input Costs For India's MSMEs: Industry

New Delhi, Jul 10 (KNN) India’s Micro, Small and Medium Enterprises (MSMEs) are likely to face higher input costs amid renewed tensions between the United States and Iran, with industry bodies warning that rising energy and commodity prices could put additional pressure on the sector.

Industry Warns of Higher Costs Amid Renewed Geopolitical Tensions

The breakdown of the fragile 60-day ceasefire has revived concerns over global supply chains and oil prices, prompting MSME representatives to caution that businesses may have to adapt to prolonged geopolitical disruptions.

Federation of Indian Micro and Small & Medium Enterprises (FISME) Secretary General Anil Bhardwaj said MSMEs must prepare for a "new normal" of recurring global trade disruptions, adding that international institutions have struggled to contain their economic impact.

"I think we have entered an era wherein global trade disorders may be routine," he said, in conversation with the Mint.

MSMEs Urged to Build Resilience

Vinod Kumar, President, India SME Forum, struck a more optimistic note, saying Indian MSMEs have demonstrated resilience during previous crises, including the COVID-19 pandemic and earlier conflicts in West Asia.

He said timely government support, particularly in shipping and working capital, along with appropriate policy measures, would help the sector navigate the latest challenges.

Oil prices have already moved higher, with Brent crude futures rising from USD 72.72 per barrel on July 7 to USD 78.70 on July 9, increasing concerns over higher production and transportation costs for MSMEs.

Earlier this year, the government launched the Emergency Credit Line Guarantee Scheme (ECLGS) 5.0 to provide additional working capital to businesses affected by liquidity stress arising from the West Asia conflict.

More than 4.11 lakh businesses have availed the scheme, unlocking over Rs 1.55 lakh crore in credit guarantees, largely benefiting MSMEs.

Supply Chain Risks Remain a Key Concern

Experts said the sector's biggest concern extends beyond higher prices to potential disruptions in the supply of essential raw materials and energy.

Veeramani C., Professor and Director, Centre for Development Studies, said uncertainty over the availability of key inputs could lead to production disruptions if supply shortages emerge.

India's MSME sector contributes around 31.1 percent to the country's GDP and accounts for nearly 48.6 percent of merchandise exports, making it particularly vulnerable to prolonged global trade and supply chain disruptions.

(KNN Bureau)