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Saturday, April 26, 2008

Put up credit policy that can absorb global shocks: ASSOCHAM


In view of global turbulence and shaking of investor’s confidence in the Indian market, the ASSOCHAM has advocated for a forward looking monetary policy that can absorb and withstand implications of global slowdown.

In a note submitted to the RBI Governor, the Chamber President, Venugopal N. Dhoot has proposed that the RBI should increase surveillance of entire financial system so that a crisis situation does not arise. The Chamber Chief has further suggested that Indian companies should be permitted to hike their overseas investment limit by 250% from current level of 200% of their total networth.

Dhoot said that the capital inflows should be diverted towards the infrastructure investment as this would help in solving the problems of access liquidity on account of capital flows and help in removing the infrastructure constraints.

The current investment boom in Indian economy can be hampered because of high borrowing costs particularly for small and medium enterprises and therefore, interest cut has become absolutely essential to ensure that SMEs contribution is enhanced towards domestic production and equally to exports. This would be possible with extension of liquidity to these enterprises particularly at lower borrowing costs.

The Chamber has also recommended that RBI should consider increasing the overall ceiling from US$ 22 billion and raising the company wise ceiling of US$20mn towards the domestic use of funds raised through the external commercial borrowing routes. The tightening of end-use norms for using the funds raised through this route should also be eased.

Since, the domestic companies are doing reasonably well, Dhoot said that India Inc. should be permitted to hike their overseas investment by 250% of their total networth so that their capital realization is used for capacities expansion with stronger currencies, added Dhoot.

The Chamber has pointed out that adequate liquidity infusion at appropriate time during crisis in the financial markets is a key element to avoid the situation of major turbulences as witnessed in the stock market in the last few months