RBI Governor Dr. Raghuram Rajan has announced Fourth Bi-monthly Monetary Policy Statement for the year 2014-15 on September 30 by keeping the key policy rates as it is and Repo Rate and Reverse Repo have been unchanged at 8.00% and 7.00% respectively, and Cash Reserve Ratio kept at 4.00% of net demand and time liability.
RBI has decided to lead the policy rate unchanged due to headline inflation despite softening of international crude prices and relative stability in the Foreign exchange market.
In his reaction to the policy, chairman of Tirupur Exporters’ Association (TEA) Mr. A. Sakthivel said RBI data on Sectoral Deployment of bank credit collected on a monthly basis from select 47 scheduled commercial banks reveals that the deployment of gross bank credit to Ready Made Garment sector has declined by 0.8% in first five months of this financial year i.e when compared 22nd August 2014 with 21st March 2014 and he further noted that the knitwear export sector after undergoing a difficult period, in continuance with the recovery in last financial year 2013-14, the positive growth rate of about 18% has been now observed and at this juncture, the reduction of interest rate is paramount importance for knitwear export sector to keep the export growth momentum in the coming months also.
Mr. Sakthivel pointed out that the government has yet to announce 3% Interest Subvention scheme on packing credit which expired on 31st March 2014 and it has “already impacted the competitiveness of our garments in the international market.”
While commenting on the RBI decision for reduction of Liquidity provided under the Export Credit Refinance (ECR) from 32 per cent of eligible export credit outstanding to 15 per cent with effect from 10th October 2014, Mr. Sakthivel said this measure will affect both the availability and cost of credit, particularly to SME units and added that the cost reduction is more important to the competitiveness of the garments.
At the same time, Mr. Sakthivel welcomed the RBI decision to increase the eligible limit for importers under the past performance route to 100 per cent from the existing 50 per cent and by which importers can hedge up to 100 per cent of the average of past three years’ import turnover or the preceding year’s import turnover, whichever is higher, subject to compliance with other conditions applicable for hedging under this route.
He reiterated only way to protect the export sector is the announcement of separate chapter for export sector and also fixing interest for pre and post Shipment export credit at 7.00%