RBI move may not boost exports

MUMBAI, June 11: The Reserve Bank of India8217;s RBI decision to reduce the interest rate on export credit is not likely to succeed in its stated aim of boosting sagging exports. According to bankers and exporters, it is not the lack of cheap finance that is hampering exports, but other factors like erosion in price-competitiveness because of depreciation of the South-east Asian currencies and global recession. The RBI announced a drastic 4.5 per cent cut in interest rates on post and pre-shipment credit, and a 5 per cent cut in the export-refinance rate on Thursday. quot;Credit to exporters has never been a problem. What we lack is good export proposals because of a changing competitive field and international recession,quot; said Bank of Baroda chairman K Kannan.

The interest-rate cut will, however, have a beneficial impact on companies8217; bottomlines in fields like software, where there is a quantum growth in exports every year. There is also a strong incentive in the RBI announcement for exporters to outperformtheir previous years8217; performances. The new interest rates are temporary in nature and are effective to quot;exporters on incremental exports8217; over and above the base-year level of exports in 1997-98. This means the new rates will be applicable only for exports over and above those recorded on March 31, 1998.