Indian export is gradually recovering from the slow down after the onset of global financial crisis. TCA Ranganathan, CMD of Exim Bank, speaks to FE?s Kumud Das about his strategies to provide a range of extra supports to Indian exporters for a long term growth.
How have you made export financing more effective?
The basic question for Indian exporters is how to get economy of scale for the export. We will have to go for community approach. Cluster financing can be another approach so as to bring down the capital cost. Hence, we are talking of shared activities among the exporters. We are also trying to create special purpose vehicle for the same. My idea of cluster financing is meant for mid-sized companies like SMEs and MSMEs. My advice to them is look at the market, we are there to finance you. Our financing will help those sectors to go for investment for future in terms of credit, and high volume profitability. This will be done for first two-three years. Technology cost will come down after a certain period of time
What are your future plans?
We want to launch, without any government support, Exim Bank?s buyers-sellers programme or deferred export. Indian exporters would be getting the contract, whereas we will be financing buyers. The only risk in the programme is the political risk that may cause default payments by the buyer.
Hence, we are covering those kinds of risks through government-run agencies like ECGC. We are also ready to go for long-term financing in case the companies are of the size equivalent to that of L&T and Gammon India. The duration of such kind of financing may be of tenures like five-year, seven-year or even ten-year. This is because we have observed that the support provided by multilateral agencies? are not adequate. As the government doesn?t have the long-term finance, our line of credit scheme fills up the gap. Apart from cluster financing, we are also going for financing of grass roots activities being undertaken by NGOs.
We are also going for joint venture financing, mezzanine financing, line of credit, merger and acquisition (M&A) financing, R&D financing and bulk import financing. Above all, at Exim Bank we have got a commercial banking window too and we are making all out efforts to grow our balance sheet there too. We have also financed a total sum of R1,000 crore by providing support to 18 joint ventures during the last year.
Do you think country?s export is recovering fast post global financial crisis?
When it comes to the market for exports, the normal demand will depend on how fast the European crisis comes to an end. But there is a need for export diversification. At present, our focus is on Africa and South America. While Latin America is responsible 3.4% of our total exports, Africa is responsible for 6% of our exports. Also, China is present in a big way at those places in sectors such as pharma, engineering goods, automobile and project exporters.
Moreover, I am trying to focus on another important aspect of Indian export. Exporters are not focusing on operational costs. They are only focusing on exchange rate. Hence, I want to make them go for shared use of facilities which will be supported by our cluster financing. I must point out that taking on Chinese competitiveness on export front would not be difficult. Chinese labour is more expensive than Indian labour. We are advantageous at the exchange rate point of view too.We can develop our export capacity by working on systematically on our advantages.