The commerce ministry is in talks with the Reserve Bank of India (RBI) to facilitate the availability of dollar denominated credit to exporters, facing challenges of a slowing down world economy and high cost of credit.
?The issue is availability of dollar credit on the good old terms. In 2009… a mechanism was put in place. We had inter ministerial committee of secretaries to oversee disbursement of dollar credit… I hope on dollar credit, we will be able to make some progress in the disbursement,? commerce and industry minister Anand Sharma said at the board of trade meeting today adding that the efforts are towards keeping the confidence of exporters and industry intact.
Exporters have been demanding the availability of dollar credit as it will reduce their cost of credit substantially.
Currently, the small and medium enterprises (SMEs) exporters avail of rupee credit at around 11 per cent interest and after factoring in the 2 per cent interest subvention provided by the government, the cost of credit comes to around 9 per cent. However, dollar credit is available at around 4 per cent, Ajay Sahai, director general, Federation of Indian Export Organisation (Fieo), said, adding that allowing dollar credit would thus bring down the cost substantially for the exporters. It will also help the government reduce the subsidy burden it bears for providing the 2 per cent interest subvention, Sahai said.
The BoT meeting was held today as a prelude to the annual supplement to the foreign trade policy (FTP) 2009-14 likely to be unveiled in the first week of April. It had representation from the ministries of finance, external affairs and micro and small and medium enterprises along with export promotion councils and exporters. Sharma also said he would look at strengthening the interest subvention.
This apart, the FTP will also focus on sectors including textiles, and agricultural products along with labour-intensive sectors like handicraft, officials present at the meeting said. Exports from the textiles sector stood at $11.51 billion during April-February 2012-13 as against $12.56 billion during the same period last fiscal, registering a dip of 7.62 per cent.
Concerned over the decline, the Apparel Export Promotion Council (AEPC) has been demanding 5 per cent duty credit scrip to garment exporters along with the extension of zero-duty EPCG scheme in the 12th five year plan.
The export promotion councils also raised concern over the rising imports with countries with which India has signed free trade agreement.
On the exports situation, the minister said that the target for the current fiscal is not only unlikely to be met, ?it may not be able to reach even the last year?s level of about $306 billion.? He said that the trade deficit is likely to widen between $193 billion-$196 billion in the current fiscal and ?this is not a small number and that is where the crisis is.?