Subsidy kills innovation and interest of people: RBI Dy Gov Chakrabarty

RBI Deputy Governor K C Chakrabarty today said subsidies killed innovation and interest of people even as leaders of various industrial sectors demanded sops to nurse their companies back to health. RBI deputy governor KC Chakrabarty. Image courtesy moneycontrol.com In an interaction with a group of industrialists, representing textile, engineering and manufacturing sectors, Chakrabarty slammed subsidies stating that it was not serving any useful purpose. "Subsidy kills innovation and interest of people. 

It makes the system uncompetitive, and result in lack of transparency and sometimes even leads to scams," he said, adding that: "Nowhere in the world, business is done on subsidies". Stating that governments also do not have enough resources to support such handouts now, he said all the governments (across the world) did not have money to give subsidies. Referring to NPAs, he said that they were not a wrong thing and it should be identified quickly and treated properly and both borrowers and lenders should take steps well in advance to tackle them. M Senthilkumar, Deputy Chairman, Southern India Mills Association, appealed the RBI to recommend to bring the textile sector under priority sector category and announce a liberal credit policy for the textile sector. 

He also sought a Cotton Stabilisation Fund Scheme, consisting of working capital loan for purchasing cotton during December-March at seven percent interest rate, reducing the margin money from 25 percent to 10 percent and increasing the credit limit from three months to nine months. In a memorandum, Tirupur Exporters' Association reiterated its demand for a separate chapter for export sector in monetary policy. The association suggested that banks might evolve a composite audit rating mechanism so that MSMEs do not have to bring any additional cost for rating and unlisted MSMEs could be kept out of the ambit of credit rating.

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