Rate Cut will Help Exports but Declining Trend in Exports Credit to be Arrested Immediately, FIEO President

The Reserve Bank of India’s decision to cut repo rate by 25 basis points is a welcome step for exports said Mr Ganesh Kumar Gupta, President, FIEO. As lowering rate, at a time when flow of credit to the MSME sector of exports is at its lowest, will help banks across the country to bring down their lending rate for the businesses giving boost both to manufacturing and exports. FIEO has been continuously urging the RBI to seriously look into the issue and take the much needed step in such a globally challenging time said, FIEO Chief.

President FIEO further added that non-food credit ending December 2017 grew at 2% and that at the end of December 2018 saw an upsurge of 6.2% in growth. Mr Gupta also reiterated that MSME sector recorded an upstick ending December 2018 to 1.9% from a negative 1.7% ending December 2017 but much of the growth in the sector was skewed towards large and medium MSMEs. The credit to small and micro sector declined to -2.1% ending March-December 2018 from a -0.4% ending March-December 2017 indicating banks aversion to higher risk perception said Mr Ganesh Kr Gupta.

FIEO President further added that the priority sector saw an upsurge to 2.9% during March–December 2018 vis-a-vis -0.5% during the corresponding period in the previous year but the export credit which had improved to -3.8% (in March –December 2017 of the fiscal) dropped to an alarming -34.7% in the corresponding period in 2018. In fact, there has been a steady decline since December 2016 from Rs 458 Billion to 425 billion in fiscal ending March 2017 and then to Rs 283 billion for fiscal ending March 2018 and then to a further Rs 185 billion ending December 2018 in absolute terms which is a cause for concern.

[Source: FIEO/PUB/PR/09/19 dated February 07, 2019]