Monetary Policy recognises global challenges in exports yet hardly address them: S C Ralhan

Ludhiana, April 7, 2015: S C Ralhan, President, Federation of Indian Export Organisations (FIEO) while commenting on the First Bi-monthly Monetary Policy Statement, 2015-16 announced today stated that the present status quo in policy rates is a result of the two rate cuts not translating into a fall in lending rates despite the fact that credit off-take has been at a low of 9.5% ending 3rd April 2015 vis-a-vis 13.5% in the corresponding period last year. 

FIEO chief stated that RBI has conceded that with the Indian rupee gaining in real effective terms, export margins are coming under pressure for those exporters without substantial imported inputs besides an uneven global recovery due to currency fluctuations and commodity prices with softness in international commodity prices providing respite to net importers while adversely impacting net exporters where price realisations have been eroded, despite export volumes going up adding to the pressure of contracting exports and a fragile external demand condition.

President, FIEO stated that with a view to encouraging hedging of forex exposures and enhancing the liquidity of the currency options market, RBI has proposed to permit Indian exporters and importers to write covered options on the basis of actual contracted forex exposure details of which are to be notified. Yet another development, FIEO chief elaborated was permitting Indian corporates eligible to raise external commercial borrowing (ECB) through issuance of rupee bonds in overseas markets. Both the above need to be assessed in terms of how it may help the export sector to reduce losses due to fluctuations in currency and accessing low cost financing from overseas markets respectively. 

Ralhan stated that given the constraints underlined by RBI for exports a target to increase exports over the next five years to $900 billion (from the 2013-14 levels of $465.9 billion) besides increasing India's share in world exports from two percent to 3.5 percent would require immediate and retrospective implementation of interest subvention and re-consideration of the recommendation of RBI’s Padmanabhan Committee report on exports.