MUMBAI: Finance minister P Chidambaram has said that his ministry supported the demand for including exports under priority sector finance and will take up the matter with the Reserve Bank of India.
Priority sector refers to the business activity identified by the regulator with mandatory lending targets. Banks not meeting the targets have to invest in low-yielding government funds for that sector.
Addressing a gathering organized by the Federation of Indian Export Organisations on Friday, the finance minister said, "One community that cannot complain about the movement of the rupee are exporters . The rupee has to find its own level, whatever that level is. We feel that 59-60 is the right level for the rupee," he said.
But even as he promised to discuss priority sector status for exports, Chidambaram said such a categorization would raise issues as it would result in dilution of weightage of those already classified as priority sector. On interest rates, however , the finance minister said that businesses cannot ask for same rates as China as the Indian economy was completely different and interest rates were a 'factor cost' . He also said that businesses can't expect globally competitive rates as these were decided depending on RBI's monetary policy and cost of funds for banks.
The FM also promised exporters to look into their demand for interest income on export earner's foreign currency (EEFC) account. The EEFC account enables exporters to retain funds in foreign currency so that they can use it for funding imports that are used as inputs. The FM also said that the government would allow the Export Credit and Guarantee Corporation of India to increase its automatic cover to exporters to Rs 1 crore from Rs 50 lakh. The rupee fell on Friday, closing 62.50 per dollar — down 42 paise from Thursday's close of 62.08. Dealers said that the rupee weakened partially due to month-end demand for dollars and also because dealers had turned cautious as they await current account deficit numbers for the June-quarter due on Monday.
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