Minimum wage hike will kill MSMEs: FKCCI
BENGALURU: Condemning the recent increase in minimum wages across Karnataka, the Federation of Karnataka Chambers of Commerce and Industry (FKCCI) warned that the sharp hike could severely affect micro, small and medium enterprises (MSMEs), especially those in industrial hubs like Peenya.
In a discussion held with various member industry associations on Wednesday, FKCCI pointed out that the revised minimum wages, especially in Zone 1 areas, have gone up from approximately Rs 15,000 to Rs 26,300 — a jump that many small businesses say is unaffordable and threatens their survival.
According to a study conducted by FKCCI among its member units in the area, around 20% of these units could be forced to shut down if the government does not take immediate corrective steps. Since Karnataka's cost of doing business is now much higher than in neighbouring states like Tamil Nadu, Telangana and Andhra Pradesh, businesses are worried about losing orders and are considering shifting operations to those states.
FKCCI members pointed out that the increase is exceptionally high compared to earlier stages and does not take into account the ground realities faced by small industries. Businesses operating on annual contracts and thin margins said they are already struggling with rising costs in areas like licensing, power tariffs and labour.
FKCCI President MG Balakrishna said, 'We fully support fair compensation for workers. However, these indiscriminate wage hikes, made without evaluating the actual paying capacity of small-scale industries, are pushing them to the edge. Karnataka will lose its competitive edge in attracting investments, especially in labour-intensive sectors such as textiles, light engineering, electronics and packaging.' He added that if MSMEs continue to struggle, the state may also lose significant tax revenue and employment opportunities as businesses move out to other states.
The FKCCI members requested the state government to introduce separate minimum wage slabs for MSMEs, different from those for large industries. It also urged the state to set up a wage rationalisation committee to review the current structure. Additional relief measures proposed include power tariff subsidies, waivers on labour cess and working capital support for small businesses.
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