Inflation: Rising Concern for Indian SMEs

25 Apr 2022

India is at the forefront in planning for a post-pandemic future, while the world appears to be addressing the coronavirus problem. With lockdowns and business closures hitting SMEs in the past, the next issue to be addressed is reviving the Indian economy

The cost of products and services has risen, and it may continue to rise. There will be a calm before the storm, and Indian SMEs are bearing the brunt. 

Inflation has made it difficult for businesses of all sizes and, in particular, SMEs to get back on their feet with the pre-pandemic growth rate. 

Effects of Inflation on Indian SMEs 

Purchasing Power Depreciation 

Inflation’s initial effect is frequently just another way of describing inflation. As the price of goods and services rises, inflation reduces a currency’s purchasing power. 

Prices rise quickly during inflation and then gradually decline, if at all. Therefore, it hits SMEs regarding purchasing power capabilities. 

Shortages of finished products 

Inflation is not a linear phenomenon; it affects businesses in diverse ways. One of the most immediate effects is supply shortage, which may delay the completion of goods. 

When producers can’t access the raw materials; the market suffers. Many entrepreneurs’ funds are held up in inventory-in-process because of the interconnected market, accruing losses and driving demand and prices upward.

The average rise in operational costs for SMEs is 19.5%, according to the National Statistical Office (NSO). Inflation based on, the Wholesale Price Index had risen to 13.11 percent

This signifies the adverse impact inflation has had on Indian SMEs. 

Borrowing Costs Increase with Inflation 

With inflationary trends on the rise, your company might struggle financially. It might force you to take up loans. The cost and availability of loans during periods of inflation might cause a heavy load on your balance sheet. With Oxyzo, you can stride through the chaos of inflationary surge. 

How Can Indian SMEs Handle Inflation? 

The strategic decisions you make about inflation management may decide whether your company survives to celebrate its next anniversary. 

Your first bet should circle around strengthening your product’s pricing. It pays to be proactive and strengthen your product’s pricing in order to boost your company’s competitive market position. Customers should also be informed about the price hikes to adapt to the new circumstances and prepare for greater costs without jeopardizing their loyalty. 

Evaluation of risks to supply chain will help in determining various stagnant points in your SMEs supply chain. Having an undue reliance on a single source could be one such hazard. Get rid of long-lead-time suppliers. A lot of money can be saved if corrections to the business’ supply chain are made in time.

Way Forward 

Inflation post-pandemic is already here, with businesses feeling the effects. Oxyzo assists you in gaining visibility into financial performance so that you can meet your objectives. With tailor-made financing solutions for SMEs, Oxyzo spurs the small and medium to large! 

Have your doubts? 

Click here to know how we are successfully revolutionising Indian SME sector.

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