Leg-Up For Exports: Chambers

Exporters, industry chambers and the commerce department have lauded the Reserve Bank of India's decision to cut interest rate on export credit and said the move would provide a fillip to falling exports.

Exporters, however, urged the central bank to ensure that the benefits are passed on to them.

The one percentage point reduction in interest rate for export credit comes close on the heels of a meeting between commerce and industry minister Murasoli Maran and Union finance minister Yashwant Sinha.

Officials said the commerce department had recommended that the maximum rate that banks charged exporters should be 2.5 percentage points below their prime lending rate (PLR) for pre-shipment credit up to 180 days and for post-shipment credit up to 90 days.

Reacting to the development, the Federation of Indian Export Organisation (Fieo) in a release said RBI's earlier "reduction was not implemented by commercial banks, in effect."

The Federation of Indian Chambers of Commerce and Industry (Ficci) in a statement said the move would boost falling exports. It added that the export growth rate for the year was being pegged at 8-9 per cent due to global demand.

"But this pro-active initiative by the RBI should help exports grow by another 2-3 per cent taking the annual growth to around 11 per cent.

"The reduction in rates is critical to boosting sentiment at a time when global economic slowdown had driven down export to 1.76 per cent in April-July 2001-02," CII president Sanjiv Goenka said, adding, "CII hoped that RBI would undertake a reduction in bank rate."

Chairman of the Assocham international trade committee Anil Agarwal said the relief is a timely move as large number of export orders were being cancelled, particularly by US importers.

Echoing Fieo demands, chairman of the Apparel Export Promotion Council, Raju Goenka said: "RBI should impress upon foreign and even non-nationalised banks that this directive has to be strictly followed."

Fieo president K K Jain said there was a need to bring about uniformity in interest rates since the previous announcement resulted in varying interest rates depending on the PLR.

"In such a scenario, it is better if the RBI links export credit with the bank rate," Jain said in a statement.

He also said that given the present scenario, where exports were on the downslide, all necessary support would be provided which included an across the board increase in drawback rates, continuity of the duty entitlement passbook scheme and restoration of benefits under 80 HHC of the Income Tax Act.

These steps would ensure that the export performance matched the 12 per cent export growth target set by the government for the current fiscal, Jain said.