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Exports of textiles will continue to lag in current quarter -FICCI
21
Jul '09
High interest cost and fall in exports would continue to restrain the growth of Indian manufacturing sector in the quarter July-September 2009, according to FICCI Manufacturing Survey. Indian manufacturing sector is likely to witness more than a moderate growth with 8 out of the 10 sectors surveyed reporting not only positive but also high growth for July-September 2009 vis-à-vis same quarter last year.

The 8 sectors that are expected to witness high growth are Metal & Metal products, Machinery & equipment, Automotive, Chemicals, Leather, Electronics and Miscellaneous industry, reported FICCI Survey. The survey was carried out for the quarters April-June 2009 and July-September 2009 based on the responses received from over 250 firms from both large and SME segments.

FICCI Survey pointed-out that credit is still provided at interest rates as high as 16% making the Indian manufacturers totally uncompetitive globally. In case of sectors like textiles, metals, machinery and chemicals, firms reported that they were still borrowing at rates between 14 to 16%. Banks are reluctant to lend to SME manufacturers as many of them had earned losses in the previous year and hence banks are insisting on credit ratings for these borrowers. Not only this, respondents of FICCI Survey pointed-out that banks were asking for a higher value of collateral security than the sanctioned limit.

On exports front, FICCI Survey reported that 5 out of 10 manufacturing sectors are expected to witness fall in their export level in July-September 2009 vis-à-vis same quarter last year. These 5 sectors are textiles, metals, tyres, chemicals and miscellaneous industry. However, FICCI pointed-out that situation in quarter July-September 2009 for exports is slightly better than the quarter April-June 2009 in which 8 out of 10 sectors reported fall in their export levels.

Textiles sector continues to be a source of worry as most of the respondents in this sector felt that their production in quarter July-September 2009 would be lower than the last year, said FICCI. However, the fall in production seems to have bottomed-out in textiles sector in July-September 2009.

The Survey points-out a number of important suggestions for taking the manufacturing sector's growth to higher trajectory. These are: Increasing drawback rates for apparels & textiles from 8 to 14%; Withdraw increase in excise duty from 4% to 8% on man-made fibres; Increasing excise duty exemption limit to Rs.5 crore for SMEs; Reduce payment delays, with stringent penalties, for SMEs; Increase DEPB benefits for steel from 3% to 8%; Reduce custom duties for raw materials (not produced indigenously) of tyre and steel industry etc.

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Federation of Indian Chambers of Commerce and Industry

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