MUMBAI, January 18: Exporters have come out strongly against the latest Reserve Bank of India measures, saying that it would adversely affect domestic as well as export production.According to the Federation of Indian Export Organisations and All India Association of Industries, exporters are not getting their legitimate dues by way of refund of excise, duty drawback and Modvat credit which put the working of export units in doldrums. ``The government must intervene to release funds to the exporters,'' said Ramu Deora, President, FIEO.
AIAI president Vijay Kalantari said the recent RBI measures will only control the rupee's slide for a while. "However, these moves will send wrong signals as it is a reversal of earlier credit policy," he said. As a result of the new measures, interest rates are bound to go up.
He said government should take strong measures to help exporters by various other means instead of indirectly devaluing the rupee which affects the economic growth and leads to inflationary
trend.
Ram P Gandhi, president, Indian Merchants Chamber, expressed fears that both the domestic and export-based industries would be strangulated if the prime lending rates (PLR) are hiked and export credit becomes costlier consequent to liquidity squeeze measure initiated by Reserve Bank of India in its attempt to rescues the falling rupee.
``Banks should not increase PLR, instead they should reduce their spreads by tightening their belts for meeting the RBI's stipulations, especially when both the domestic and export sectors of industry are struggling for survival in the face of acute economic recession on the domestic front and cut-throat foreign competition on the export front,'' he said.
In the process of rescuing the rupee, the RBI has dealt a sledgehammer blow to industrial growth by increasing the bank rate to 11 per cent. It has also drained out about Rs 6,000 crore to Rs 7000 crore from the banking system by raising CRR to 10.5 per cent. ``This extreme squeeze has created panic and sent call
money rates piercing the ceiling to touch 110 per cent early on Saturday,'' Gandhi said.
He hoped that the measures introduced by RBI will be for temporary period for a limited purpose and would be withdrawn immediately on restoring stability to the rupee.
Experts debunked the view that the rupee has to fall substantially to align itself with the sharp drop in the value of other south-east Asian currencies -- Indonesian rupiah, South Korean won, Thai baht and the Malaysian ringitt -- to be competitive.
Compared to the rupee's fall to the 40 level to the greenback from 35.78 in end-April, the Indonesian Rupiah has in the same period dropped by 64.29 per cent to 6,900 to the greenback from 2,460 in end-April.
The Malaysian Ringett fell by 41.86 per cent to 4.30 from 2.5, the Thai Baht by 47.92 per cent to 50 from 26.07, and Korean Won by 45.96 per cent to 1,660 from 895.
Most senior forex experts felt that "competitiveness can only be ensured through enhanced productivity and product-quality". They
added that "given that export-import forms a small part of the gross domestic product, devaluation per se is not going to confer any great advantage".
"There is no evidence to suggest that exports perk up with a fall in the rupee," said a dealer. During the period April to October 1996-97, the country's exports stood at $19,898 million. First half export figures (April-October) for 1997-98 stood at $18,917.1 million, an increase of 6.8 per cent over the previous comparable period. However, during 1997-98, the Indian unit has fallen (April'97-January'98) by well over 10 per cent to 36.36 in end-October from 35.78 in end-April and lower to 40.17 today. In other words, a sharp fall in the rupee has not translated to any sharp increase in exports.
"You got to see the composition of your exports. Unless you have a closer look at export-basket, all talk of competitiveness by depreciation -- just because a few other currencies fell -- does not mean much," said a banker.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
