Big Firms In India Cornering Credit; Micro & Small Businesses Face Crunch

New Delhi, Oct 17 (KNN) India’s small and micro enterprises are grappling with a severe credit crunch, as capital flows increasingly favour large conglomerates preparing for ambitious expansion.

While major corporations like Tata, Reliance, and Adani Group map out investment plans worth billions, the bottom tier of the economy—comprising millions of micro and small businesses—is struggling to access affordable credit amid tight fiscal conditions and rising interest rates.

S&P Global Ratings predicts that Indian conglomerates will invest USD 800 billion over the next decade—nearly three times more than the previous ten years.

However, nearly 40 per cent of this investment will flow into futuristic sectors like green hydrogen, electric vehicles, semiconductors, and data centres, bypassing the micro enterprises that typically generate non-farm jobs.

As these giants tap foreign partnerships and equity markets, smaller businesses face increasing difficulty accessing credit, with lenders tightening terms on unsecured loans.

The credit squeeze is intensifying, especially for micro businesses that rely on loans with interest rates of 25 per cent or more. India Ratings, a unit of Fitch, has flagged early signs of financial stress in this segment, as many enterprises are now burdened with excessive debt accumulated during the pandemic.

With consumer demand stagnating—particularly in rural areas—these businesses are finding it increasingly difficult to stay afloat.

“Higher costs and mounting competition are eroding micro enterprises’ margins,” India Ratings analysts noted in a recent report. Many small businesses, which had been key drivers of job creation over the past decade, are struggling to maintain operations as post-pandemic growth wanes.

Adding to the pressure, rural consumer demand has remained weak, with millions of workers migrating back to agriculture due to job losses in urban areas.

Between 2005 and 2018, 66 million people exited agriculture, chasing better opportunities in cities. However, the pandemic reversed that trend, forcing 68 million workers back to farms. The sluggish recovery has left micro businesses, particularly in villages, with fewer customers and higher costs.

Meanwhile, big corporations are consolidating their dominance, securing capital by leveraging their market power in industries such as telecom, energy, and infrastructure. As they capture growing shares in aviation, cement, and media, these giants gain pricing power over consumers—squeezing smaller players further.

Analysts believe that unless monetary policy shifts, small businesses will remain on the margins of India’s economic revival. If the monsoon tames food inflation, the Reserve Bank of India might ease interest rates, but the impact on credit access remains uncertain.

(KNN Bureau)