Flexible market policies must for changing economic situation – GEA
Mr Surinder Anand, Executive Secretary, Garments Exporters Association pointed out that the withdrawal of various tax exemption and fiscal benefits by the Ministry of Finance has already affected the export performance and reduced the profit margin and competitiveness of Indian garment exporters in international market.
However, realizing the gravity of the situation the Prime Minister, Dr Manmohan Singh has constituted an Apex group under his chairmanship to coordinate the Government's response to points raised by Industry from time to time.
The members of the Apex Group are the Finance Minister, Industry and Commerce Minister, Deputy Chairman Planning Commission and the Governor, Reserve Bank of India. The Group will meet regularly to coordinate/decide the Government's response to the points raised by industry from time to time with regard to the current global financial crisis and its impact on India.
The Prime Minister has also approved a Committee of Officers chaired by the Finance Secretary that will meet on a daily basis or as often as required to consider issues raised by Industry. The members of the Committee of Officers are Commerce Secretary, Secretary (DIPP) and Secretary (Planning Commission). The Joint Secretary (Banking) Finance Ministry will be the government contact person to receive suggestions form Industry.
Mr Anand expressed the hope that both the Apex Group and the Committee of offices will recommend urgent remedial actions to be taken by the Government to overcome the present serious crisis being faced by the exporters because of worldwide recession and sharp decline in export orders from overseas markets.
Mr Anand further pointed out that the Ministry of Textile and the Ministry of Commerce and Industry have attempted to do their best to help, but due to absence of overall appreciation of the problem involved and lack of necessary coordination, the individual Ministries have not been able to assist the exporters in the manner or to the extent necessary as the subject matter involved more than one Ministry of Government and required policy decision at the highest level.
Most of the demands made by garment exporters through their Associations, Apparel Export Promotion Council, Ministry of Textiles and Ministry of Commerce have not yet been accepted by the Ministry of Finance.
Mr Anand observed that our monetary and fiscal policies do not seem to go hand in hand. He pointed out that while fiscal policies, deficit financing in particular, are expansionary in their effect, monetary policy aims to regulate credit supply. Now a restrictive credit policy may not have much chance to succeed if currency policy is expansionary.
To reconcile the two is a delicate task and sometimes it becomes an impossible task. In a situation of rising prices, for example interest rates have hardly any impact on borrowings. The control of the Reserve Bank of India over the money market is not as complete as it ought to be on account of the peculiar nature of the money market. The non-official financial agencies are free not to react to RBI policies.