RBI released the first bi-monthly Monetary Policy Statement for the year 2014-15 where the key rates like repo rate, CRR, Bank rate and repo rate remained unchanged and the Textiles Exporters were not very happy with the announcement made.
With RBI resisting any reduction of interest rate/ repo rate, Chairman AEPC, Mr. Virender Uppal has expressed his concern that the momentum of the garment export growth may be slowed down further with increase of rupee strengthening over dollar.
In his statement issued, Chairman AEPC said, “With the inflation hovering around 5% and core sector growth improving to 4.5 % in February, impacting positively on industrial production, industry was expecting some relief in terms of lowering of interest rate. With Current Account Deficit also expected to moderate in line with the trade deficit, there was clearly fiscal room for RBI to reduce the interest rate.”
This job critical industry is suffering from high input cost leading to reduced profit margins. Majority of our factories are SME’s and an employment generating sector, and due to adverse consequences of not lowering interest rates, it might lead to the loss of jobs and further slowing of manufacturing activity, he added.
Mr. Uppal demanded, “AEPC has already requested for separate chapter for pre/post packing credit rate of 7.5%. Even the Padmanabhan committee constituted by RBI has recommended this sector to be covered under the priority sector lending.
RBI should consider this favorably so that momentum of garment export growth is not lost. I therefore, request Government to revise the interest rates downwards so that we leverage our export and employment potential.”
Chairman AEPC also demanded that RBI should notify extension of the 3% interest subvention which has expired on 31st March 2014 as the garment exporters are trying hard to meet the target set by the Government.
RBI on 1st April 2014 released first bi-monthly Monetary Policy Statement for the year 2014-15 and made the following announcements:
-keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent;
-keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL); and
-increase the liquidity provided under 7-day and 14-day term repos from 0.5 per cent of NDTL of the banking system to 0.75 per cent, and decrease the liquidity provided under overnight repos under the LAF from 0.5 per cent of bank-wise NDTL to 0.25 per cent with immediate effect.
Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standingfacility (MSF) rate and the Bank Rate at 9.0 per cent.