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From the President’s Desk…..
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My Dear Fellow Exporters,
First of all, on behalf of FIEO Managing Committee Members, I congratulate Mrs. Pratibha Patil on assuming the office of the new President of India. Our Federation is looking forward to a new era of Indian politics under her leadership and we hope her to provide fresh impetus to the growing participation of Indian women in all walks of life.
We are deeply dismayed over the credit policy announcements made by the RBI. We were expecting our Central Bank to extend the relief provided in terms of reduced rate of interest on export credit to all sectors irrespective of the investment made in plant and machinery. Exporters cutting across all product segments and income groups are equally suffering on account of rising rupee and therefore, a more liberal and equitable export credit regime needs to be put in place.
Adequate compensation to exporters against rupee appreciation can be made only by bringing down the cost of rupee credit to the bank rate (i.e. 6%) and the pre-shipment credit in foreign currency to LIBOR + 25 basis points. This credit should be available at a uniform rate for a period of 360 days for both pre & post shipment credit, as against 180 days and 90 days respectively at present.
Waiver of overdue interest, normally ranging from 15 to 18%, has also been overlooked in the policy announcements. This high percentage of overdue interest completely wipes off the competitive edge of the exporters, especially the smaller ones.
Furthermore, some procedural simplifications were also awaiting considerations by the Central Bank in the existing circumstances. Currently, the negotiable set of shipping documents is routed through shipping agent - exporter’s bank - negotiating bank - buyer’s bank, etc. Goods, at times, reach the buyer’s bank before the original documents, especially when the exporter is located in rural or semi-urban export clusters. In such cases, goods start incurring demurrage and the buyer is also unable to take delivery of the goods. Therefore, the Federation had suggested that the shipping agent be permitted to send the original (negotiable) shipping documents to the buyer’s bank immediately upon shipment of the goods. A confirmation in writing of this compliance may form part of the terms of the L/C for negotiation purpose.
Delegation of powers at the AD level for purchase orders being raised to the supplier (wherein the goods are being sent directly from the supplier to the project site abroad) in the case of third country exports which at present are being submitted to RBI for approval, was also expected to be considered.
The IMF in its update on the World Economic Outlook announced on July 27, 2007 has upgraded world growth projections from 4.6 to 5.2% for 2007 and India’s growth at 9%. While GDP growth has proceeded at a rapid pace for the last several years, the median real incomes have not increased in equal proportions. Further, in many emerging economies, including many Asian economies, inequality has also increased. Over the last decade, inequality has increased in 13 out of the 18 Asian countries, as per the IMF data. Therefore, the merchandise exports, which now constitute 20% of the GDP, and the SME segment accounting for about 65% of the trade, may be provided the necessary support to counter the rupee appreciation (14% since last July) and the increasing transaction costs.
We exporters have been expressing fears that if adequate compensatory measures are not taken then Indian exports would not be able to maintain its 20 percent plus growth in the current fiscal. Our nightmares are coming true. The statistics released by the government a few days ago shows the export growth dipping to 14 percent. This is way behind the 28 percent growth target set by our Hon’ble Commerce Minister.
Yours
sincerely,
Ganesh Kumar Gupta
PRESIDENT
