NEW DELHI: The average increase in operating costs of small and medium family enterprises is 19.5% which is far above the current retail and wholesale inflation rates of 6.07% and 13.11%, respectively estimated by the government, a study by SP Jain Institute of Management and Research (SPJIMR) reveals.
The study, undertaken by SPJIMR’s Centre for Family Business & Entrepreneurship (CFBE), found that a vast majority of small and medium family enterprises have experienced significant operating cost increases and are responding with price increases.
As per the study, manufacturing enterprises seem to be bearing the brunt of the cost increases, reporting an average cost increase of 24%, whereas service enterprises reported an average cost increase of 14.4%.
“This would impose a strain on an economic strategy that relies on a manufacturing-led industrial recover,” says the study. Businesses located in North and Western India seem to have had cost increases more than those in the rest of India, the study found.
The small and medium enterprises (SMEs) attribute their rising operating costs to increases in the prices of raw materials, fuel, and labour. While raw material price increases are affecting both the manufacturing and service sectors, the rise in fuel and labour costs is having a greater impact on the SME service sector than on the SME manufacturing sector.
Reasons for the rise
The small and medium enterprises (SMEs) attribute their rising operating costs to increases in the prices of raw materials, fuel, and labour. Raw material price increases are affecting both the manufacturing and service sectors.