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Tuesday, Jul 27, 2004

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`Indian trade lacks skill in creating demand'

G. Gurumurthy

Coimbatore , July 26

THE Indian trade and industry could to a great extent manage well the shift in the financial cost towards lower interest rate regime from high rate regime but they are yet to succeed that much in demand creation. This phenomenon is fairly reflected in the corporate/ industry performance. The growth in sales reported by many industries is not as much as the improvement in the profits they post and this has largely indicated that they are not able to create demand for their goods, according to Mr S. Sridhar, Executive Director of Exim Bank of India.

With competitive financing becoming a global trend, the really challenging trends for exporters and the funding bodies are the emerging factors in international trade such as commoditisation of manufactured goods and strategic investments by group affiliated companies to reduce the number of vendors, besides the increasing product outsourcing opportunities. These in turn had brought about pressures on individual exporters to pay greater attention on product-distinguishing to attract the importers, Mr Sridhar observed during his interaction with the members of the Confederation of Indian Industry (CII) here.

As several developing countries are hesitant to invest in emerging markets in view of the poor sovereign credit ratings, individual exporting firms and their companies could detach themselves from their country rating and raise funds based on the strength of their individual corporate standing, he pointed out. He maintained that his Bank had moved from being a mere lender of export /import activities to business partner and solution providers to the companies by striving to provide export marketing services.

During the interaction, some of the CII members pointed out that while fixing the export funding for individual companies, the Exim Bank's assessment of contract value of exports ignored the aspects such as the customs duty/other local levies their goods attracted at the shores of importers which varied between countries and in some countries such as Brazil, the customs tariff remained very high.

Mr Krishna Samaraj, Chairman, CII Coimbatore, who chaired the interactive session, wanted Exim Bank to have a special funding package for the small and medium enterprises. He also urged the Bank to give impetus to funding the imports as the global competition would necessitate for the Coimbatore-based industries to go for a higher import of raw material/semi-finished products for re-export of finished products.

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