Concerned over the decline in exports for the11th consecutive month, the government on Wednesday announced a 3% interest subsidy scheme for exporters to make the labour-intensive exports sector globally competitive.
“The CCEA has given its approval for the Interest Equalisation Scheme (earlier called the Interest Subvention Scheme) on Pre and Post Shipment Rupee Export Credit with effect from April 1, 2015 for five years”, an official statement said. The scheme will have an annual financial implication of up to Rs 2,700 crore. The rate of interest equalisation would be 3%, which would be evaluated after three years.
The scheme would be available to all exports of micro, small and medium enterprises (MSME), and 416 tariff lines, but not to merchant exporters. Under the scheme, exporters get loans at affordable rates, which helps them ship more goods to foreign markets.
An earlier interest subsidy scheme for exporters had ended on March 31, 2014. Giving details of the scheme, power minister Piyush Goyal said a 52% decline in petroleum products exports to $18.78 billion in April-October attributable to the fall in prices of crude oil was the main culprit behind the shrinking of the country’s exports over the last one year. Excluding this decline in the value of exports of petroleum products, India would have done better than many other major economies as far as shipments of merchandise are concerned, the minister said.
India’s exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53% to $21.35 billion due to a demand slowdown, although trade deficit showed some improvement due to higher import contraction.
As exports contracted continuously, the commerce ministry on October 30 raised support to outbound shipments of more products — including textile, telecom and electronic items — under the Merchandise Exports from India Scheme (MEIS), in a desperate bid to arrest the slide. The ministry’s move to partially tweak the MEIS by providing more incentives to exporters came after the finance ministry had agreed to raise the allocation for the scheme to Rs 21,000 crore for the current fiscal, from R18,000 crore announced earlier.
Under the MEIS, the government provides exporters duty credit scrip at 2%, 3% and 5% of their export turnover, depending upon the product and the country, as envisaged in the foreign trade policy 2015-20.
On Monday, the duty drawback rates were raised to help exporters.