Sirsa MP, former Union Cabinet Minister, All India Congress Committee general secretary and Congress Working Committee member Kumari Selja has raised concern over the impact of high borrowing costs on businesses, small entrepreneurs, the middle class and employment opportunities, arguing that expensive credit could put additional pressure on economic activity at a time when India needs stronger investment and job creation.

Selja said an increase in lending costs has a direct bearing on the financial position of borrowers, particularly small traders and entrepreneurs who depend heavily on bank credit for working capital, expansion and day-to-day business operations. She said an increase in the repo rate can also raise the burden of equated monthly instalments for borrowers, making household and business finances more difficult to manage.

Expensive credit can affect investment and employment

According to the Congress leader, the effect of high interest rates extends beyond individual borrowers. When the cost of borrowing rises, businesses may postpone expansion plans, reduce fresh investment or limit hiring. For small enterprises operating with comparatively narrow margins, even a moderate increase in financing costs can influence decisions relating to production, expansion and employment.

Selja said the government must recognise that the objective of building a developed India cannot be achieved without creating an environment in which trade and industry can grow. She stressed that small businesses, self-employed people and medium-sized enterprises require access to credit that is not only available but also affordable and predictable.

She pointed out that several developed economies provide business loans to different categories of borrowers at comparatively competitive interest rates. India, she said, should also work towards building a credit system that gives small and medium enterprises easier access to reasonably priced finance.

Even small rate increases can raise repayment burden

Highlighting the effect of interest rates on borrowers, Selja cited the example of a home loan of Rs 50 lakh. She said that even a 0.25 percentage point increase in the interest rate could result in an additional interest burden of around Rs 2.45 lakh over a 25-year repayment period, depending on the applicable loan terms.

She argued that the same principle becomes particularly important in the case of business loans. Higher borrowing costs can increase the overall cost of production and working capital, potentially affecting the ability of entrepreneurs to expand their operations or create new employment opportunities.

Selja said controlling inflation remains important, but monetary and economic policy must also take into account the impact of borrowing costs on ordinary citizens and productive businesses. In her view, a balance is required between maintaining price stability, supporting economic growth and protecting the financial security of borrowers.

Focus on small traders, self-employed youth and MSMEs

Questioning the Centre’s approach, the Congress general secretary asked why India could not provide greater relief to small traders, self-employed young people and micro, small and medium enterprises when other economies use competitive credit as a tool to encourage business activity.

She said affordable finance is particularly important for first-generation entrepreneurs and small businesses that may not have large financial reserves. Easier access to reasonably priced credit, she maintained, can help such businesses sustain operations, invest in equipment, increase production and potentially generate additional employment.

Selja said the Congress has consistently advocated policies aimed at employment generation, protection of small industries and expansion of economic opportunities. She called for a broader policy review in which the government and the Reserve Bank of India assess the combined impact of inflation, interest rates, employment and business activity rather than looking at these issues in isolation.

Selja seeks comprehensive review of borrowing costs

The Congress leader urged the Centre and the RBI to examine whether additional measures could be introduced to make institutional credit more accessible to smaller businesses. She said the objective should be to ensure that interest rates do not become a major barrier for entrepreneurs who are trying to maintain or expand productive economic activity.

She also linked the issue of affordable credit with the broader challenge of employment generation. According to her, a business environment in which entrepreneurs are able to access finance at manageable costs is essential for encouraging investment and creating sustainable jobs.

Selja’s remarks come amid a wider debate over the balance between inflation management, borrowing costs and economic growth. She said policy decisions should take into account their effect on households as well as the businesses that provide employment and contribute to local economic activity.