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Last updated: 19 Feb, 2019  

Rupee.9.New.Thmb.jpg Export sector concerns

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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 lingering issue.

Meanwhile, some 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.

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