Rate cuts yet to translate into reduction of credit cost: FIEO

New Delhi, Oct 24 (UNI) Commenting on the mid-term review of the Annual Policy 2008-09, Federation of Indian Export Organisations (FIEO) today said that measures such as enhancing remittances to three lakh dollars for imports from one lakh dollars for overseas suppliers and increasing limit for advance remittances for imports, both for goods and services to five million dollars without bank guarantee by letter of credit would help the MSME sector.

FIEO President Ganesh Kumar Gupta elaborated that, however, widening merchandise trade deficit (43 per cent expansion in April-August 2008 on a y-0-y basis) was a cause of concern, besides the volatility of the rupee which has depreciated sharply by 18.9 per cent against the dollar in the current financial but could not add much to competitiveness of our exports as no one can foresee its movement three to six months down the line.

FIEO Chief explained that while the inflationary pressure has eased marginally, the impact of the repo cuts and CRR is yet to be reflected in the cost of credit and public sector banks are yet to announce the BPLR rates post these cuts on which the export credit rates for the MSME export sector are contingent.

Further, he added that RBI has corroborated his view point that exports will face uphill task in 2009 in view of slowdown of global economy.

While, overall growth in 2009 will be about three per cent (down from five per cent in 2007), our major markets like the US, the EU and Japan are likely to grow by 0.1 per cent, 0.2 per cent and 0.5 per cent respectively, thereby, impacting exports of garments, textiles, leather, carpets, handicrafts and marine products, he added.

Mr Gupta explained that pre-shipment and post-shipment dollar loans as per RBI guidelines are to be made available to the MSME export sector at LIBOR+ 100 basis points.

However, since the all in cost ceilings for dollar loans both for ECBs and trade credits have been enhanced, RBI may issue necessary directives to the banks for earmarking dollar loans for MSME export sector as per existing guidelines, a FIEO release said.

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