The Reserve Bank of India on Tuesday restored a 2% interest subvention on rupee credit of exporters from labour-intensive and small-scale industries. The sop will be available to these exporters with retrospective effect from April 2011 and until March 31, 2012. Exporters of handicrafts, handlooms, carpets and gems and jewellery will benefit.
An earlier interest subvention scheme had lapsed in March. A surge in exports of late had prompted the government to discontinue the scheme. The sop has now been restored given the slump in export markets.
The RBI said small exporters across sectors would be entitled to cheaper bank credit, subject to a minimum interest rate of 7%. ?Banks may ensure to pass on the benefit completely to eligible exporters,? the central bank said. Exporters, however, feel that small exporters could have been given a 3.5-3.75% interest subvention. Large corporates too should have been given 2% subvention, they say.
The interest subsidy is expected to stand the exporters in good stead in global markets where they have to compete with Chinese firms which are able to borrow at lower rates.
KT Chacko, director, Indian Institute of Foreign Trade, said the lower interest rate would help exporters. RBI?s serial rate hikes had led to their borrowing costs rising. ?This move is WTO-compatible; so, it is not a subsidy the country is giving,? he said.
Earlier in the day, a high-level Board of Trade (BoT) also met to review the situation of Indian exports in the wake of rising worries about the US economy and the debt crisis in Europe.
The BoT, headed by commerce minister Anand Sharma and including well-known industrialists also discussed issues like currency volatility, availability of dollar credit and the high cost of credit.
Ramu S Deora, president, FIEO said: ?In a scenario where interest rates risen from 7% to 12.5%, extending relief to the sectors like gems & jewellery, apparel, engineering, agro and marine will help exports grow. However, there are still sectors which need to be included under the scheme as they are highly employment intensive sectors.?
The government recently introduced duty drawback rates for all the beneficiaries of the now-defunct DEPB scheme.
Expressing similar sentiments, Rakesh Kumar, executive director, Export Promotion Council for Handicrafts added that since they were losing the market to other countries like, China and Bangladesh, the government’s move will help them give a competitive edge and help them over come the tough times.
India’s exports grew 54% during April-August, but the commerce secretary has voiced concern on the challenges ahead.