The Hindu Business Line : Credit Policy must sustain growth momentum: FICCI

DISCLOSING the highlights of the survey on expectations of FICCI constituents on the Monetary and Credit Policy for 2005-06, to be announced on Thursday, the FICCI President, Mr Onkar S. Kanwar, said, "It points to the need for prudent calibration of the credit demand of the industrial sector and the imperative of sustaining the growth momentum of the Indian economy."

The FICCI President said that the survey reveals that corporate India is unanimous in its support for reduction in the spread between the borrowing and lending rates "as this would help raise resources at globally competitive prices".

The survey states that while infrastructure and agriculture sectors should continue to receive added focus, to be a growth-sustaining, the Credit Policy must keep inflation in check and lower the cost of finance, particularly for exports.

Stability in the interest rate regime, introduction of benchmark PLR, forex use to bridge the infrastructure deficit, reduction in the borrowing and lending rate spreads for corporates, foreign participation in securitised assets markets and improvement in credit delivery for agriculture and the SME sectors should be the main planks of the 2005-06 Monetary and Credit Policy, survey indicated.

Almost 75 per cent of the respondents to the survey wanted that the interest rates should remain stable in the future as the growth rate has just started picking up and in order to sustain the growth a stable interest rate regime is critical.

Similarly, three-fourths of the respondents felt there has been improvement in the credit delivery mechanism in the last one year, but yet there is scope for further improvement mainly in agriculture and SME sectors.

Introduction of benchmark PLR is favoured by 63 per cent of the respondents. About 80 per cent of the survey respondents agreed with the Kapur Committee recommendation that larger units should not be allowed to deduct their expenditures and make adjustments against income, if their payment gets delayed beyond the prescribed limit of 90 days.

Apart from highlighting the need for putting in place the essential regulatory support for proper implementation of the Basel-II norms, 67 per cent of the respondents felt that there is a need to check the rupee appreciation to boost exports.

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