'Incentivize investment proposals from MSME export sector'

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SME Times News Bureau | 25 Jan, 2012
Exporters' body FIEO Tuesday urged the government to incentivize investment linked proposals from the country's micro, small and medium enterprise (MSME) export sector.

The government should avail a low cost corpus of funds from banks at 7 percent to incentivize the MSME export sector's investment linked proposals and the RBI may set up a committee to monitor new proposals being submitted to banks and ascertain reasons for rejection, if any, said the Federation of Indian Export Organisations (FIEO) in a press statement.

In a press statement, FIEO President Rafeeque Ahmed also demanded the government to extend interest subvention beyond 31st March 2012 for exports across sectors, as at present it is confined to Handicrafts Handlooms, Carpet and manufacturers in Small and Medium Enterprises (SMEs).

The scheme should be extended and expanded given the slowdown in advanced economies, he added.

Commenting on RBI's third Quarter Review of the Monetary Policy, he added that the status quo in policy rates is as anticipated.

"The previous 13 successive policy hikes have been detrimental for investment/capital formation and the manufacturing indices (both IIP and PMI) have been adversely impacted," he said, adding that monetary easing is important to enable credit off-take for export sector.

Ahmed explained that the liquidity crunch resulting in average bank borrowing of Rs.1.26 trillion every day from RBI’s repo window this month has prompted a CRR cut as banks pay 8.5 percent for short term asset – liability mis-match requirements and 9.5 percent to borrow from the marginal standing facility.

FIEO also expressed concern that GDP in the first half of the fiscal was 7.3 percent, the second quarter was down to 6.9 percent and the third quarter as per analysts again shows a downward bias.

"Global growth prospects for 2012 have further deteriorated and while World Bank has already revised global trade forecast to 4.4 percent from 7.4 percent , IMF may also do the same shortly," the FIEO chief said.