Urjit Patel, Governor, RBI recently announced Third Bi monthly Monetary Policy for the year 2018 -19 and noted the decision of Monetary Policy committee to increase the policy repo rate by 25 basis points from 6.25 per cent to 6.50 per cent to achieve the medium term target for headline inflation of 4 per cent on durable basis.
Raja M Shanmugham, President said the increase in Repo Rate by 0.25 per cent has happened consecutively in this financial year, which would be impact to the knitwear garment sector at a time when the units are already struggling to sustain in the global market, which is witnessed by decline of knitwear garment exports in the first quarter of the current financial year 2018-19 by 22 per cent while compared to the corresponding period in the last financial year.
While pointing out the pricing pressure prevailing in the global market, Raja M Shanmugham apprehends that the increase in cost of credit will make the exporting units uncompetitive and think twice before taking up the fresh orders.
He said when the interest rate in the international market is between 2 per cent to 4 per cent, in our country, the interest rate is in the region of 11per cent and to compensate that only, Government has announced Interest Equalization Scheme and providing 3 per cent Interest subvention the packing credit and he appealed to increase the Interest Equalization scheme rate from 3 per cent to 5 per cent immediately. Raja M Shanmugham said the banks should take a lenient view while giving credit to the exporting units, particularly MSMEs.