Namrata Kath Hazarika | 31 Jul, 2008
Small and Medium Enterprises (SMEs) fear that ice-thin profit margins due to rising inflation may drive them to close shop if the situation persists longer.

Inflation has jumped to double digit figures bringing the economy at stake and have slowed down the potential growth of business. Recent figures indicates that many small and medium enterprises (SMEs) are trying hard to retain their venture in such a sky-scrapping inflation.

High rates of small business shutting shop have made owners agitated and irked both mentally and emotionally. Many have gone bankrupt because of financial crunch, lack of managing power and the steep rise in raw materials' costs have made small business owners tense.

"There is no doubt that rise in the market price have created havoc in the business prospects. Inflation has made a steep rise, climbing to double digit figures that has made the small and medium enterprises jittery,"  says Mukesh Kohli owner of Aries India.

"Today, we need to cut short our profit margins in order to beat inflation and rising input costs. I think if these kind of problems linger on for a long time, I assume that the day is not far away when me and my company will go bankrupt."

"In fact, the interest rates for loans have increased drastically. With this kind of high interest rates I cannot think of borrowing to support my company."

Inflation has been a nightmare for the entire industry. The government is trying hard to bring out measures to curb the loses that the industrial sectors are being incurred due to reeling inflation.

In this context Prime Minister Manmohan Singh said that bringing down the prices will be the top priority of the government. "My priorities are tackling the imported inflation caused by steep increase in oil prices. Our effort is to control inflation without hurting the rate of growth and employment," the prime minister said in his address at the conclusion of the trust motion in the Parliament recently.

When asked about the effects of inflation on one's business, Sanjay Kumar, proprietor of  Ambay Auto Electric Industries said, "Even though the government  is looking for better measures to curb the inflation the fire that has occurred in the real market prices cannot be doused until coming December."

In fact, he thinks the prices will soar much higher that inflation is likely to hover around the 15 mark."

"Moreover, we have to burden the pressure of surging input costs, depreciating rupee cost and above all rising inflation."

"The government is definitely trying hard to bring down inflation. Like wise they have recently won the trust vote for the approval of the Indo-US nuclear deal. However, the nuclear project will definitely bring solutions to all the nation's problems. I think to some extent we will feel at ease from the soaring inflation rates," he added.   

Meanwhile, industry circles too feel that high inflation rate is her to stay for a couple of months if not more.
"Rise in interest rates would further push costs of production in the short run, leading to higher inflation," said Sajjan Jindal, president of the industry lobby Associated Chambers of Commerce and Industry (ASSOCHAM).

"Present interest rates are at a peak and any further rise in the rates would hamper growth as well as the employment outlook for the economy," he said after a meeting among 150 members of the chamber's managing committee in Mumbai.

"Instead, the government should focus on reforms in sectors like education, agriculture, telecom, insurance, provident fund, logistics and retail, as a long-term strategy to counter inflationary forces in the domestic and external economic system," he added.