World Msme Forum Urges Finance Minister To Intervene Against Rbi's Repo Rate Hike; Warns Of Higher Inflation, Increased Burden On Msmes And Common Citizens
Oct8,2026
| Jagrati Lahar Bureau | Ludhiana
The World MSME Forum has expressed serious concern over the Reserve Bank of India's
decision to increase the repo rate by 25 basis points from 5.25% to 5.50%, urging the
Hon'ble Finance Minister of India to immediately review the impact of the decision on
India's Micro, Small and Medium Enterprises (MSMEs), middle-class families and
economically weaker sections. The RBI has also shifted its monetary policy stance from
"Neutral" to "Calibrated Tightening," indicating that further rate hikes may follow if
inflationary pressures continue.
Mr. Badish Jindal, President, World MSME Forum, stated that while inflation control is
an important responsibility of the RBI, the present inflation is primarily the result of global
supply-side shocks, including rising crude oil prices, increasing energy costs, geopolitical
conflicts and disruptions in international supply chains. In such circumstances, increasing
interest rates will not significantly reduce imported inflation but will certainly increase the
cost of borrowing for industries, businesses and consumers.
The Forum observed that the latest increase in the repo rate has come at a highly sensitive
time when India is entering the festive season. Traditionally, the months leading to Diwali
witness the highest demand for consumer goods, automobiles, housing, electronics, textiles
and industrial products. Higher interest rates during this crucial period will increase EMIs on
home loans, vehicle loans, MSME loans and working capital facilities, thereby reducing
purchasing power and discouraging fresh investments. The resulting decline in consumer
spending could adversely affect manufacturing, trade and employment across the country.
The World MSME Forum emphasized that India's MSME sector contributes nearly 30% of
the country's GDP, around 45% of exports and provides employment to more than 11
crore people. Affordable credit is the backbone of this sector. Any increase in interest rates
directly raises production costs, reduces competitiveness and weakens the ability of MSMEs
to generate employment and expand production.
The Forum further pointed out that banks are expected to pass on the entire 25-basis-point
increase to borrowers whose loans are linked to the Repo Rate or External Benchmark
Lending Rate (EBLR). Even a seemingly small increase can have a substantial cumulative
financial impact. Illustrative impact of the latest repo rate hike:
A manufacturing MSME maintaining a ₹1 crore working capital facility may bear
an additional annual interest burden of approximately ₹25,000 if the entire increase is
transmitted by banks.
A medium-sized manufacturing unit with a ₹5 crore working capital limit could face
an additional annual financial burden of approximately ₹12.5 lakh, significantly
increasing production costs and reducing profitability.
The Forum stated that these figures represent only the direct impact of the repo rate increase.
Higher borrowing costs will also raise the prices of raw materials, transportation,
warehousing and inventory financing, compelling industries to increase product prices.
Consequently, consumers will bear the burden of higher inflation, thereby defeating the very
objective of controlling inflation.
The World MSME Forum further noted that the country is already facing rising fuel prices,
higher electricity tariffs, increasing logistics costs and uncertainty arising from international
conflicts. Under these circumstances, increasing interest rates may become another
inflationary factor instead of a solution. During periods of global uncertainty, economic
policy should encourage production, investment and consumption rather than discourage
them through higher financing costs.
The Forum also expressed concern that the RBI has revised its inflation outlook upward
while simultaneously indicating the possibility of additional monetary tightening in the
coming months. Such expectations may create uncertainty among entrepreneurs, delay
investment decisions and adversely affect industrial expansion.
The World MSME Forum has therefore appealed to the Hon'ble Finance Minister to hold
immediate consultations with the Reserve Bank of India and consider appropriate relief
measures, including:
Interest subvention for MSMEs.
Concessional working capital loans for manufacturing industries.
Enhanced Credit Guarantee support.
Special festive-season credit packages for MSMEs.
Measures to ensure that banks do not pass on the entire burden of repo rate hikes to
small borrowers.
Policy initiatives aimed at reducing production costs instead of increasing financing
costs.
The Forum believes that India's long-term economic strength depends upon a vibrant MSME
sector, robust domestic demand and affordable access to finance. At a time when global
energy prices, geopolitical tensions and inflation are already putting pressure on businesses
and households, additional interest rate hikes may prove to be a burden on industry,
employment and economic growth. The World MSME Forum therefore earnestly requests the
Government of India to take timely corrective measures in the interest of the nation's
economy and millions of entrepreneurs.
-worldmsmeforum-msme-rbiratehike-reporate-inflation
RSS FEED