PM lends ear to exporters, eye on Re

NEW DELHI: Prime Minister Manmohan Singh is in consultation with RBI governor YV Reddy on macro measures that might need to be taken if the rupee continues its northward movement. The PM has been bombarded with petitions from the exporting community on the need to check the rising rupee which, they claim, has affected their business. Government sources said the PM may form a high-level group to propose steps for minimising the adverse effects of rupee appreciation.

Senior officials from the commerce department held a meeting with exporters two days ago seeking details on the levels to which exports were affected and the markets and products particularly hit due to rupee appreciation. Details were also sought on the package for exporters announced by the government last week that was expected to provide relief to the community.

The package sought to increase the drawback and DEPB rates by 5% to neutralise the state and local duties not being refunded. Other measures including reducing interest rates on packing credits and premium for ECGC coverage and conversion of exchange earner’s foreign currency accounts to an interest-bearing instrument were also announced.

While the package has come as a relief for exporters claiming drawback and DEPB, those who do not claim such benefits would not profit from the move. Small exporters in sectors such as textile, leather and handicraft claim that stronger measures need to be taken to bail them out of the crisis.

Although commerce & industry minister Kamal Nath has said the government does not want to tinker with the rupee to check its rise, the Centre wants a back-up plan in place in case things worsen. RBI has made interventions and prevented the rupee from appreciating to the psychological Rs 40-a-dollar mark.

The central bank, besides sucking out liquidity through the market stabilisation scheme, could go for a hike in cash reserve ratio (CRR), which was last increased in February. There is already a buzz in the banking circles of another round of CRR hike.