Mr A Sakthivel, President, Federation of Indian Export Organisations (FIEO) while commenting on the fall in economic growth to 6.1% in the first quarter (April-June 2009) from 7.8% in the corresponding period stated that the drought has further dented the economy and although 1/5th of the country's GDP is contributed by agri, 2/3rd of the population is subsisting on it. A weak monsoon will affect domestic economy which is driving on rural buoyancy.
President, FIEO, stated that RBI data corroborates the slowdown with a y-o-y fall in bank credit to business to 14.9% from 25.8% a year ago. The net bank credit to Government, on the contrary, has increased from 12.6% to 45.0% in 2009-10 possibly creating an upward pressure on interest rates. While in a slow-down phase there is less demand stimulus, higher interest rate may further dampen credit off-take.
On the export front, there may be some marginal pick-up. As per the US Bureau of Economic analysis real spending on durable goods rose 1.8% in July after 0.8% in June and savings rates fell further to 4.2% in July from 4.5% in May. Mr Sakthivel added that how much of this would accrue to the Indian export kitty would be determined by our export competitiveness. Credit costs and banking charges which continue to be higher by a differential of 7-8% than many of our competitors may well be a key determinant in price sensitive recession- ridden markets.
Federation of Indian Export Organisations