Karnataka Industry Body Warns Proposed Wage Hike Could Trigger MSME Shutdowns

Bengaluru, Apr 24 (KNN) The Federation of Karnataka Chambers of Commerce and Industry (FKCCI) has expressed significant concerns regarding the government's proposal to increase minimum wages, warning that such action could lead to widespread closures among micro, small and medium enterprises (MSMEs), especially in major industrial centres like Peenya.

FKCCI convened a stakeholders' meeting on Wednesday after extensive consultations with its member industry associations to evaluate the potential impact of a revised variable dearness allowance (VDA).

Feedback from entrepreneurs operating in Peenya Industrial Estate, described as Asia's largest small-scale industrial cluster, indicated severe consequences.

Numerous small units reported that a substantial wage increase would likely make their operations financially untenable.

Research conducted among member industrial units in Peenya indicated approximately 20 per cent face immediate closure risk if the government mandates increased minimum wage requirements.

FKCCI president MG Balakrishna stated, "We fully support fair compensation for workers. However, indiscriminate wage hikes, without considering the paying capacity of small industries, could push many towards the brink. Karnataka is rapidly losing its cost competitiveness to states like Tamil Nadu, Telangana, and Andhra Pradesh."

The federation cautioned that additional pressure on MSMEs could result in significant job losses, industrial migration to neighbouring states, and diminished tax revenue for the state government.

(KNN Bureau)