Budget 2012: Interest rate for MSME sector be capped at 7%, says FIEO

FIEO says that interest rate for MSME sector be capped at 7% and for others at 9%; or subvention should be provided to all sectors of exports at-least till 31st March 2013.

By Agencies | Updated: Feb 11, 2012, 12.46 PM IST

NEW DELHI: Thirteen successive increases in policy rates have made interest rates uncompetitive internationally and hit at capital formation and investment. PMIs have slumped to levels of contraction only to revive in the last couple of months. It is, therefore, suggested that:

• Interest rate for MSME sector be capped at 7% and for others at 9%; or subvention should be provided to all sectors of exports at-least till 31st March 2013.

• Export to be included in priority sector lending.

Further, declining export credit/skewed deployment of credit is a cause of concern and needs to be addressed. LIBOR linked ECB funding for MSME exports may be considered to give an impetus to the export sector which is losing much of its morale and confidence because of slowing export growth and downgrades in the US by Moody's and the recent downgrades of 9 countries in the EU by S&P implying poor financials of markets abroad and declining consumption patterns of buyers.

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