Jalan said that an important priority for the current year would need to concentrate on measures to provide maximum support to export efforts. Ruling out any monetary sops for the exporters in the credit policy announced today, Jalan said that during 1998-99 (upto February), exports have declined by about two per cent in US Dollar terms.

Recently, commerce minister Ramakrishna Hegde had indicated that interest rate on export should be cut to give a fillip to sagging exports. But Jalan said that the current measures are enough to prop up exports. ``Exporters have the choice of reducing their interest costs to (or below) international levels either through availing of pre-shipment rupee credit at 10 per cent and sellingexpected export earnings in the forward market or by availing of foreign currency loans,'' he said.

Expressing his disappointment at the credit policy, the president of FIEO, Navratan Samdria said the policy is not at all in tune with the Exim policy announced by Hegde. On Jalan's comments that exporters should take advantage of the forward premium, FIEO said such speculation especially by small and medium exporters could prove to unhealthy and risky. ``The RBI should not encourage such speculation,'' he warned the central bank.

Jalan said while 10 per cent in nominal rupee terms would appear higher than the prevailing international interest rates, the foreign currency forward premium in forex market in India is also higher at around seven per cent for six months.

An exporter can avail of the rupee credit and sell expected export earnings in the forward market, effectively reducing interest cost to only around three per cent. Jalan said in response to suggestions from exporters, the facility to issuecheques against their `exchange earners foreign currency' (EEFC) balance is being granted from May 1, 1999.

The country's cumulative trade deficit during the April-February 1998-99 period has risen by about 28 per cent to US $ 8.2 billion from $ 6.4 billion in the same period last year, as exports are expected to decline for the first time after 1991-92.

Exporters were demanding that they should be provided credit at 7 per cent (in rupees) and the total lendable resources of banks be augmented in favour of the export sector from 12 to 15 per cent for the first half of 1999-2000. ``The ground realities are different. An exporter has the apprehension that the dollar will appreciate in the coming months and therefore needs to cover his risk in such an eventuality. Hence the risk cover taken from banks for forward buying of the dollar will cost him 6.7 per cent over and above the interest rate of 7 per cent being offered by banks,'' said a FIEO official.

This in practical terms will work out 13.7 per centwhich is the effective rate of interest in practice, he stated. The RBI should consider the interest rates charged by neighbouring countries like Singapore, Hong Kong, Taiwan and Malaysia which offer highly competitive rates of interest.