Rising interest rate, poor domestic demand exerting pressure on MSMEs of Gujarat

AHMEDABAD: The surging interest rates, low domestic demand and strong international economic conditions are exerting pressure on the micro, small and medium enterprises (MSME) of the state. Reports suggest that 15 % of India's net MSME units housed in the state may get affected.

These MSME units are witnessing fears of a strong surge in the non-performing assets (NPAs) in MSME segment in the high rate regime. The state industry players feel that the recent 25 basis points rate surge by Reserve Bank of India (RBI) as not only unwarranted but also unfortunate.

The industry players also fear strong surge in the non-performing assets (NPAs) particularly in the MSME segment since the economic condition continues to fall.

Jaimin Vasa, chairman - MSME committee, Gujarat Chamber of Commerce and Industries (GCCI), said, “The demand is shrinking, which is prompting units to operate at lower capacity utilisation. Further, export scenario is also no longer attractive, hence there is less incentive for small industries to continue production. In addition to that, RBI keeps increasing rates. Such situation is feared to lead some of the MSME units to turn as NPAs.”

Moreover, the bankers in the state are worried about a probable surge in the NPAs in medium and large industries segment.