Right level of rupee is 59-60/$; will still be competitive for exporters, says Chidambaram
The Finance Ministry wants the Reserve Bank of India to include bank credit to exporters under the priority sector lending category. Such a move could boost export income and reduce the country’s current account deficit.
Priority sector refers to those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation.
Typically, priority sector loans are small-value loans to farmers for agriculture and allied activities, micro and small enterprises, poor people for housing, students for education and other low-income groups and weaker sections.
According to RBI guidelines for priority sector lending, for every Rs 100 mopped up as deposit, a bank has to lend Rs 40 to the priority sector.
At an interactive session of the Federation of Indian Export Organisations, Finance Minister P. Chidrambaram said: “As you know the Ministry of Finance supports it (priority sector tag to export credit). But there are some issues that have to be resolved. The fear is that if you put export credit under the priority sector, some other elements of priority sector may get affected.”
“We’re in talks with the RBI. The Padmanabhan Committee has already made a number of recommendations on export credit, including cost of credit and the quantity of credit,” he said.
On the rupee, Chidrambaram said the right level of the rupee is 59-60 against the dollar. “The rupee should not overshoot its mark. But even at 59-60/$, I think it is extremely competitive for exporters.”
The rupee closed weaker at 62.50 against the dollar on Friday on increased buying of the American currency by banks and corporates.
The Finance Minister said he will consider raising Export Credit Guarantee Corporation of India’s automatic insurance cover provided for exporters from Rs 50 lakh to Rs 1 crore.
According to Chidambaram, global markets have begun recovering, offering an opportunity to Indian exporters. “Things are changing. In the US, the economy is clearly on an upswing. In Europe too, some countries are showing better growth rate and Japan is bouncing back. So, there is a better opportunity for exporters,” he said.
He said that there will be no roll back in the duty on iron ore exports.