Slash interest rates to save economy: FIEO

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SME Times News Bureau | 25 May, 2012
Proactive policy initiatives through the forthcoming Foreign Trade Policy and rationalisation of interest rates are the needs of the time that can save the Indian economy from the ongoing crisis, said exporters body Federation of Indian Export Organisations (FIEO) today.

In a press statement, FIEO president M Rafeeque Ahmed demanded stability in exchange rate not only for economy but also for exports as impact of rupee depreciation on exports is only marginal.

While commenting on RBI's latest data released for the week ending 18th may 2012 stated that fluctuations of the rupee between May 8 and May 11 varied between -5.14 percent to -7.07 percent and the inter-bank forward premia for the same period varied from 8.66 percent to 7.61 percent (for 1 month). While the 3/6 month premia for the above period fluctuated between 7.57 percent/ 7.08 percent and 6.82 percent/ 6.19 percent indicative not only of interest differentials as it were but a more stable perception of the rupee-dollar equation in a 3/6 month time frame.

However for micro, small and medium enterprise (MSME) export sector, fluctuations of the rupee-dollar equation has its hedging costs which constricts lean margins further in a price sensitive/ demand scarce market, he added.

Ahmed elaborated that the Organisation for Economic Co-operation and Development (OECD) had toned down projections for global growth, which are estimated at 3.4 percent this year and 4.2 percent in the next year.

OECD believes that the reason for slower growth in India is due to its own policy issues rather than the global turmoil. And as a result India's potential growth, which averaged 7.4 percent per annum during 2001-07, will be lower at 7.2 percent during 2012-17, he pointed out.