Reserve Bank of India while announcing the Mid – Quarter Monetary Policy: March 2013, reduced the Repo Rate from 7.75% to 7.5% with immediate effect.
In a reaction to the policy, Dr A Sakthivel, president said though he welcomed the decision of Reserve Bank of India for reduction in Repo rate, this measure would not encourage entrepreneurs in export sector to make investment in their units.
Dr.A.Sakthivel mentioned that the Readymade Garment exports sector has to be treated at par with labour intensive sectors like agriculture and handloom etc, considering the large employment provided by this sector also.
Dr.A.Sakthivel noted that when the interest rates provided to garment sector in our competing countries are between 6% and 7%, the effective rate of interest in India is between 9.5% to 10% that too, even after subtracting 2% interest subvention in our country, . With announcement, the softening of the interest rates could be maximum by point twenty five percent, which is quite minuscule.
Dr A Sakthivel said that a separate chapter for exports in banking sector is necessary and fixed 7.5% interest rate should be available for pre and post shipments credit given to exporting units. Dr A Sakthivel said that the country has to now balance the growth and also simultaneously check the inflationary trends and added that even at a positive growth; the inflation can be controlled and improves the manufacturing.
Dr.A.Sakthivel noted this could be possible only by reduction of the interest rates in one go which would help to boost manufacturing sector and enhance our competitiveness in the Global Market.