Exporters operating in exceptional uncertain environment
The Federation of Indian Export Organizations (FIEO) has said that the Reserve Bank of India’s decision to raise the policy repo rate by 25 basis points to 5.50 per cent and change its monetary policy stance to calibrated tightening is understandable in view of emerging inflationary pressures. However, the Federation cautioned that higher borrowing costs could increase the financial burden on exporters, particularly MSMEs, at a time when global trade is facing heightened uncertainty.
FIEO President S C Ralhan said that the RBI’s decision to raise the repo rate by 25 basis points is understandable against the backdrop of rising inflationary pressures and the need to maintain price stability. At the same time, the Indian economy has demonstrated considerable resilience, with GDP growth at 7.8 per cent in Q1:2026-27 and merchandise as well as services exports maintaining strong momentum. It is therefore important that monetary tightening does constrain the working capital availability of export-oriented businesses, particularly MSMEs.
He added in a release on 7 Oct, “Exporters are currently operating in an exceptionally uncertain global environment. Geopolitical tensions, volatile energy prices, supply-chain disruptions, longer transit times and delays in payments are extending the export working-capital cycle. Higher interest costs in such circumstances can adversely affect the competitiveness of Indian exporters, especially those operating on thin margins.”
Ralhan urged the RBI to provide greater flexibility in export finance by extending the period of pre-shipment and post-shipment export credit from the existing 270 days to 450 days because of longer shipping and transit periods, logistics disruptions and delayed realisation of export proceeds. Such an extension would provide much-needed breathing space to exporters and enable them to honour their international commitments without facing undue financial stress.
FIEO further suggested that targeted liquidity support and adequate availability of affordable export credit should accompany the calibrated tightening stance. This would help exporters absorb elevated input and financing costs while maintaining production, fulfilling overseas orders and exploring new markets.
FIEO noted that the RBI has projected real GDP growth at 7.1 per cent for 2026-27, while recognising continuing global headwinds arising from geopolitical tensions, energy-price volatility and tighter global financial conditions. The central bank has also projected CPI inflation at 5.2 per cent for 2026-27, with inflationary pressures expected from food, energy and other commodity prices.
Ralhan added that India’s resilient growth trajectory provides a strong foundation for expanding our global trade footprint. Bilateral trade agreements, buoyant services exports and the recovery in merchandise exports can provide further impetus to the economy. However, maintaining export competitiveness will require continued access to affordable finance and appropriate policy support, particularly for MSMEs. Fiinews.com
