Govt announces 3% interest subsidy to boost exports

By: | Published: November 18, 2015 9:45 PM

Concerned over continuous decline in exports, government today announced 3 per cent interest subsidy scheme for exporters which will have a financial implication of about Rs 2,700 crore.

India's exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53 per cent to USD 21.35 billion due to a demand slowdown, although trade deficit showed some improvement. India’s exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53 per cent to USD 21.35 billion due to a demand slowdown, although trade deficit showed some improvement.

Concerned over continuous decline in exports, government today announced 3 per cent interest subsidy scheme for exporters which will have a financial implication of about Rs 2,700 crore.

The decision to help boost overseas shipments was taken at a meeting of Cabinet Committee on Economic Affairs headed by Prime Minister Narendra Modi.

The CCEA has given its approval for “Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on Pre and Post Shipment Rupee Export Credit with effect from 1st April, 2015 for five years”, an official statement said.

The rate of interest equalisation would be 3 per cent, it said, adding that it will be evaluated after three years.

Financial implication of the proposed scheme is estimated to be in the range of Rs 2,500 crore to Rs 2,700 crore per year, it said.

However, it added that the actual implication would depend on the level of exports and the claims filed by the exporters with the banks.

Funds worth Rs 1,625 crore in the non-plan head of account are available under Demand of Grants for 2015-2016 and would be made available to the Reserve Bank, it said.

The scheme would be available to all exports of Micro, Small and Medium Enterprises (MSME) and 416 tariff lines. But it would not be available to merchant exporters.

“We believe that this will give a big boost to exports particularly for the MSME sector, handicraft, agri-products and food processing,” Power Minister Piyush Goyal said after the Cabinet meeting.

He said the previous government had discontinued the interest subvention scheme, which has made the country’s exports uncompetitive. Under the scheme, exporters get loans at affordable rates, which helps them ship more goods to foreign markets.

India’s exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53 per cent to USD 21.35 billion due to a demand slowdown, although trade deficit showed some improvement.

The scheme would be implemented through funds available with the Department of Commerce under non-plan during 2015-16 and the restructured scheme would be funded from plan side from 2016-17 onwards.

It said that the Commerce and Industry Ministry may place funds in advance with RBI for requirement of one month and reimbursement can be made on a monthly basis through a revolving fund system.

“On completion of three years of operation of the scheme, Department of Commerce may initiate a study on impact of the scheme on export promotion and its further continuation,” it said adding the study may be done through one of the IIMs.

The operational instructions of the scheme would be issued by RBI.

The scheme will help the identified export sectors to be internationally competitive and achieve higher level of export performance.

It covers mostly labour intensive and employment generating sectors like processed agriculture/food items, handicrafts, handloom products, coir, jute, readymade garments, sports goods, paper and stationary, leather, medical instruments, auto components and engineering.

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