Industrial growth during the first five months of the current fiscal is only 3.5 per cent against 5.5 per cent in the same period last year. Except in a few areas, the general industrial scenario continues to be bleak. The industry is hence looking forward to some stimulus in the form of reduction in interest rates. The RBI decision to maintain the status quo on this front has come as a disappointment.

One cannot lose sight of the fact that the inflation is hovering around 8 per cent for the past few months. This has been caused by the rise in prices of primary articles. With the good monsoon, this pressure is expected to ease once the kharif crop comes to the market. Under these circumstances, tackling the problem of industrial slowdown should have receivedpriority, warranting some urgent action.

The performance of the economy on the export front has also been disappointing. During April-August 1998, there was a negative growth of 2.9 per cent. This is in spite of the reduction in the export credit to 9 per cent. According to the credit policy, the rate of the export credit is not sustainable and will be reverted to the earlier levels after March 1999.

Going by the present uncertainty on the domestic front as well as in the international markets, one may not see any dramatic improvement in exports in the next five months. As is well known, interest rates in the international markets are even lower and unless one can see a real buoyancy in exports, there is no real justification for reverting to the earlier interest rate regime.

The proposal to set up a working group of bankers to simplify the procedures with an objective to make the credit available online and to review the operation of EEFC scheme to make it export-friendly is a welcome step.

Thevarious measures being introduced on the basis of the second Narasimham Committee report are a step in the right direction. It is clear from the south-east Asian and Russian crises that a transparent and disciplined banking system is important for an orderly growth. However, it needs to be emphasised that in the present context of the slow industrial growth, this should not come in the way of flow of credit to the industry.

The policy acknowledges the importance of the role of the NBFC sector but does not address any specific issue apart from assuring appropriate changes based on the recommendations of the task force constituted for the purpose of revamping the industry. A concrete blue-print for the revival of this beleaguered sector is called for urgently.

SD Kulkarni is the managing director and CEO of L&T