SME Times - Interest Rates Should Not Move Upwards: FIEO, Interest Rates Should Not Hike, Reserve Bank of India Monetary Policy, The Federation of Indian Export Organization

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SME Times News Bureau | 20 Apr, 2010
A Sakthivel, President, Federation of Indian Export Organisations (FIEO) while commenting on the annual monetary policy stated that as anticipated the RBI has hiked short term lending rates and CRR, however, whether the 25 basis points increase across the board would be sufficient to contain the accentuating inflation which is at an average WPI of 8% and a CPI of over 13% is a matter of debate but will lead to increase in the interest rates.

FIEO Chief stated that the first six months of this fiscal have seen an acceleration in industrial growth since a trough in March 2009 which is largely driven by private consumption and government spending but with the pick up in corporate capex and exports the growth trend would be more sustained provided the global market demand remains consistent.

However situation in Euro zone and Japan is making exporters jittery. How long Emerging Market Economies can pull up exports is yet to be seen?

President, FIEO hoped that the guidelines on forex derivatives to be announced in June 2010 as stated would come out some practical recommendations for the MSME sector in view of the volatility and current rupee appreciation which shows little sign of abating. Enhancing Collateral free loans to 10 lakhs from the existing 5 lakhs would benefit the micro sector if implemented in the right earnest.

Sakthivel welcomed the implementation of the base rate which will ensure transparency and likely to benefit MSME segment with reduced cost of credit.

FIEO Chief however expressed his concern over the volatility of the rupee stating that it appears to be an inevitable in the present circumstances but can be contained by measures proposed by FIEO that the Government can provide a fix rate of exchange at Rs 47.50 to a USD for exports on optional basis for a year and regulate the foreign investment so that it stays in India for a minimum period of two years.

An alternative remedy could be a 1 percent charge on all non-FDI and ECB inflows, and this number could be calibrated up or down depending on the volumes of flows.

Incidentally, since the beginning of 2009, US banks have been charging an additional 1 percent foreign transaction fee for any credit card/ ATM transaction outside the US, FIEO Chief added.