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RBI's 'wait and watch' stance may impact MSME export sector: FIEO

Tags: RBI, FIEO, M Rafeeque Ahmed, MSME export, policy rates, credit, investment

December 19, 2012 | COMMENTS ( 0 )

RBI's 'wait and watch' stance may impact MSME export sector: FIEO

Federation of Indian Export Organisations (FIEO) has expressed caution over the Reserve Bank of India’s (RBI) decision of maintaining status quo on policy rates in its mid-quarter review of the monetary policy.

M Rafeeque Ahmed, President, FIEO, in a release said, “For the MSME export sector, stagnating bank credit which in absolute terms was Rs 40.11 lakh crore ending March 2012 as against Rs 39.42 lakh crore ending March 2011, is an ominous sign of things to come if real time measures are not taken fast enough.”

He stated that a package to revive the MSME export sector across the board may be considered.

He suggested the government to incentivise entrepreneurs investing in towns of excellence identified by the Foreign Trade Policy (FTP), investment linked incentives for setting up effluent plants as in the case of leather sector in Agra; warehousing cold chain; testing facilities may be provided.

Under the existing guidelines, withholding tax on interest payments is five per cent for three years. On this, Ahmed said that for External Commercial Borrowings (ECBs) for MSME export sector, waiver of withholding tax may be granted to make ECBs to the sector more attractive.

FIEO chief stated that while inflation may moderate as it appears to be doing, what is of grave concern is that investment in the economy is shying away due to costs/business environment from a high of 25 per cent of GDP in 2007-2008 (gross fixed capital formation, private sector as a percentage of GDP) to levels below 20.78 percent.

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