FIEO expresses concern at status quo hitting at investments suggests expeditious commissioning of Committee on transparency in lending rates keeping in view sensitive demand hit international market: M. Rafeeque Ahmed,President FIEO
FIEO/PUB/PR /78/12 - July 31, 2012
FIEO expresses concern at status quo hitting at investments suggests expeditious commissioning of Committee on transparency in lending rates keeping in view sensitive demand hit international market: M. Rafeeque Ahmed,President FIEO
Mr. M. Rafeeque Ahmed, President, Federation of Indian Export Organisations (FIEO) while commenting on the first quarter Monetary Policy review stated that the Reserve Bank of India’s stance on maintaining a status quo on the policy rates has been known for some time and therefore the announcement of maintaining repo rates as such has not come as a surprise. While the rationale given by RBI has been inflation / declining GDP to 6.5% (as against 7.3% projected earlier) / poor monsoons, the other side of the impact would be a further retardation in the IIP which was around 2.4% in May 2012 and may lead to the contraction in the capital goods sector which had shown a contraction in 9 out of the past 11 months hitting investments adversely.
FIEO Chief stated that reduction in SLR effective from 11th August 2012 from 24% to 23% should release liquidity of the order of Rs.55000 crore in the system and this would probably help the demand supply mismatchas a result of which banks are borrowing from the RBI repurchase window.
President, FIEO stated that in the earlier policy announcement, RBI had infused Rs.82,600 crore and another Rs.30,000 crore for export credit refinance when export credit refinance was raised from 15% to 50%. This combination had neutralized the impact of the rupee volatility and the large Govt. Borrowings. It remains to be seen whether the existing dispensation would suffice the currency movement which seems to be somewhat stable now, although, Government has so far has borrowed Rs.2.33 trillion which is 41% of its annual borrowing target for the year.
FIEO Chief stated that a Committee be set up to assess the export credit requirements vis-a-vis the availability of funds for the MSME sector and expedite the commissioning of the Committee on transparency in lending rates given the sensitive international market where interest rates are hovering around 1% to 2%.
