Dilip Chenoy, director general, Society of Indian Automobile Manufacturers, welcomed the positive steps announced by the government and RBI. He feels that this is a welcome move particularly since some of the issues of the automotive sector have been specifically addressed. The measures announced could ensure that ultimately liquidity reaches customers at reasonable costs. This is important to address the passenger car and two-wheeler segments.
Amongst the industry bodies CII has appreciated the additional liquidity the package will bring into the economy but has also hoped for additional measures as suggested by them.The fiscal stimulus package announced by the government also includes several measures aimed at addressing some of the problems being faced by the economy. CII had highlighted the lack of access to credit, the slowdown in exports and domestic demand as well as the accumulation in inventories as the key sources of stress in the economy. The stimulus package has increased access to external borrowing by removing the interest rate ceiling on ECBs, allowing 'development of integrated townships' as an end-use for ECBs and allowing NBFCs dealing exclusively with infrastructure financing to raise ECBs. This will reduce the financing constraints faced by non-bank infrastructure finance companies. Liquidity support has also been provided to NBFCs to ease their financing constraints. "We welcome the steps taken to reduce interest rates and increase availability of credit. Greater access to external borrowings, special liquidity measures for NBFCs and increase in FII investment limit in corporate bonds are positive measures" said K V Kamath, president, CII. Significant benefit could flow to the economy from the additional funding option provided to IIFCL. If indeed infrastructure projects worth Rs100,000 crore are implemented over the next 18 months, as envisaged in the package, this will provide a significant stimulus to the economy. However, the government must focus on implementation. The enhancement of the credit guarantee coverage for very small credit facilities is a welcome measure. There is however a large section of SMEs that face difficulty in managing liquidity given the elongation of the working capital cycle, and in accessing credit facilities |
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