To provide cheaper credit for exports, Federation of Indian Export Organisations (FIEO) has asked Reserve Bank of India to increase the aggregate limit of foreign currency loans to $25 billion and extend the deadline to take such loans by a year.
“The RBI had set a $6.5 billion limit on dollar loans to banks,” which has been exhausted. We have asked for an increase in this limit to $25 billion so that SMEs can get dollar loans at an interest rate, which is less than 3-4 per cent,” M Rafeeque Ahmed, President, FIEO, told newspersons after meeting the RBI brass.
Ahmed met the RBI Governor and Deputy Governors for the customary pre-policy meet with industry bodies to discuss measures needed in the policy to boost exports and growth.
Measures, not helping
Ahmed said that despite many measures being taken by the central bank to push exports, it has not helped much. The RBI had put a cap on forward contract for hedging, which is limited to 25 per cent of the contract.
“This was decided when rupee was trading at 48 to the dollar. However, after the rupee fell to 55 levels, it has not helped much. Hence, the percentage must either increase or be abolished so that the exporters are not restricted on hedging,” he said.
Outlook on exports
Ahmed said that exports were less than $300 billion in FY 2012-13. “However in FY 2013-14, exports will grow by 15-20 per cent because the US economy has stabilised and emerging economies are showing growth,” he said.
When pointed that exporters have not fully taken advantage of a depreciating rupee, Ahmed said that export growth is not a function of rupee depreciation alone.
“Rupee depreciation only provides an initial fillip to the exports but soon the impact is absorbed in the cost,” he said.
The FIEO chief said the Governor termed the current account deficit, which was at 6.7 per cent of GDP in the October-December quarter, as “very alarming”.
Ahmed suggested that the tenure of the special export credit facility, which will expire in June this year, must be extended by one year and that 50 per cent of the funds must go to the SME sector.
“We have requested the RBI to tell banks to put exports on a priority list. Banks must compulsorily lend to exporters, so that the flow of credit for exports will increase. I hope the RBI will look into it,” Ahmed added.
According to him, the flow of credit to exporters has gradually slowed to 3.7 per cent of the overall credit as compared to 12 per cent three years ago.