Hopes of knitwear unit owners dashed as RBI may continue policy

Manufacturing competitiveness of Tirupur knitwear cluster is poised to dwindle further as indications from Reserve Bank of India ahead of the monetary policy review this month are not heart-warming when it comes to cutting short-term bank rates.

Some RBI officials’ remarks, a few days ago, that there was no room for monetary stimulus in the wake of continuing high inflation, have dashed the hopes of textile entrepreneurs here who are badly in need of credit for capacity expansion at lower costs.

“If the interest rates cannot be brought down even as overall industrial output in the country has been contracting, it will be a doomsday for many clusters like Tirupur, which are bothered by a plethora of problems including the power cuts and rising production costs,” Raja M. Shanmugam, an apparel exporter and member of Tirupur Exporters Association, told The Hindu .

Entrepreneurs and technocrats, by and large, are wondering how inflation can be tackled without affecting industrial growth.

The figures obtained from the Lead Bank sources show that overall credit disbursement to the predominant small and medium enterprises sector in the district had fallen short of the proportional Annual Credit Plan targets for the first half of the current financial year.

“Unless cost of funds come down, i.e. interest rates are cut on loans, off-take of credit will continue to be poor which means that capacity expansion in sectors like apparel production will take a back seat,” S. Dhananjayan, industry consultant and member of Institute of Chartered Accountants of India, pointed out.

Technocrats feel that the RBI’s modus operandi of taming the rising inflation by keeping the short-term bank rates high instead of addressing the actual problems that trigger inflation like black money in circulation, was “senseless”.