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Kolkata, Oct. 30 Calling for deeper financial reforms in order to help small and medium scale exporters tackle the problem of rupee appreciation, Mr Rakesh Shah, Chairman of Engineering Export Promotion Council (EEPC), said here today that “we hope the CRR hike will not lead to interest rates being hiked by banks as a consequence of the estimated Rs 15,000 crore excess liquidity, especially since the lending and borrowing rates have not been touched”.

More reforms

Reacting to the Credit Policy announcement, Mr Shah said further financial reforms could emerge by developing the derivatives markets with products tailored to meet the requirements of the SME sector, like allowing trade in currency futures of as low as $500, “so that small exporters can also hedge against rupee appreciation”.

He said it was important to broadbase the foreign exchange market and create competitive conditions in the banking sector so that exporters can benefit from a competitive exchange rate scenario.

The EEPC chief felt that in view of the rupee appreciation and increase in imports, the RBI’s decision to retain the GDP growth projections for 2007-08 at 8.5 per cent was a little optimistic, “given the current counter-cyclic monetary management by the RBI”.

(This article was published in the Business Line print edition dated October 31, 2007)
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