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The business confidence of small and medium enterprises has declined for the April-June quarter due to fears of a further rise in interest rates by the Reserve Bank, industry body CII has said.
The Business Confidence Survey of SMEs for the current quarter is estimated at 62.1, a decline of 3.1 points over the January-March period, CII said. “Inflation and rising interest rates have hit small businesses hard,” the survey said.’
RBI is expected to raise key lending and borrowing rates in its annual monetary policy this week, which would make funds costlier to the industry.
The central bank has already increased the short-term lending (repo) and borrowing (reverse repo) rates eight times since March 2010 to tame demand as a means of fighting inflation.
Headline inflation was 8.98 per cent in March this year, while food inflation was 8.76 per cent for the week ended April 16.
The business confidence outlook for SMEs in services sector decreased by 1.4 points compared to a bigger decline of 4.8 points in case of industrial area. The MSMEs provide employment to about 6 crore persons through 2.6 crore enterprises.
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