Bikky Khosla | 19 Feb, 2019
A meeting of the Board of Trade (BoT) was
convened by the Commerce Ministry last week in the national capital. It was attended
by the Commerce Minister, top officials from several ministries, including
Commerce, Finance and Agriculture and representatives of all major industry
bodies, Export Promotion Councils and industrialists. In the meeting, several major
concerns were raised by the exporting community, and it will be interesting to see what the Centre does to addresses challenges in the coming days.
Not surprisingly, the
issue of decreasing
flow of credit topped the list of concerns of the export sector representatives
attending the BoT meeting. According to RBI data, export credit
collapsed by 54.8% as of December 21 from a year before, and this figure clearly
reflects the gravity of the situation. Also, credit to the SME
sector declined to -2.1% ending March-December 2018, indicating banks' aversion
to lending to the sector. To reverse this situation, the Finance Ministry must
give some clear directions to our banks in this regard.
The RBI recently changed
its policy stance to "neutral" from "calibrated tightening"
and also cut its policy rate by 25 basis points. It is a welcome decision, but
unfortunately it is equally true that such rate cuts are not always effectively
transmitted by commercial banks to borrowers. According to latest media
reports, the RBI Governor will meet bankers this month and urge them to
transmit the benefits of the recent rate cut to borrowers. This is again a
welcome move, but I think we need a permanent mechanism to put an end to this
other important issues also found place in the BoT meeting. They include retrospective
effect of pre-import conditions, delays in refund of Input Tax Credit,
withdrawal of GSP benefits by US, exports to Iran and OFAC countries,
availability of incentives for exports to neighbouring countries, etc. These
issues need to be urgently addressed by the government, particularly in the
backdrop of slowing down of exports growth in recent months.
I invite your opinions.