MSMEs’ overall export credit cost to be reduced with new loan scheme for exporters, says FIEO

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Published: September 17, 2019 8:08:35 PM

Commerce minister Piyush Goyal had last week highlighted the ‘not satisfactory’ growth in exports this year despite the country’s huge export potential “due to the trade dispute between the US and China which has provided a window of opportunity to Indian manufacturers."

Under the new scheme, insurance cover has been increased from the current 60 per cent to 90 per cent of the principal and interest.

Enhancing the scope of Export Credit Insurance Scheme (ESIC) by Export Credit Guarantee Corporation of India (ECGC) will help lower the overall export credit cost including interest rates particularly for micro, small and medium enterprises (MSME), said Sharad Kumar Saraf, President, FIEO. The initiative, which is part of the new scheme —  Nirvik announced by the Finance Minister Nirmala Sitharaman last week in order to boost exports by giving more credit access to exporters, will provide much-needed support to them for exporting to countries with little or more risks, according to Saraf.

Under the new scheme, insurance cover has been increased from the current 60 per cent to 90 per cent of the principal and interest. “In order to facilitate banks further Ministry of Commerce & Industry has enhanced Insurance cover for banks up to 90% for the working capital loans and moderation in premium incidence for the MSME sector,” the commerce ministry said in a statement.

“As of now, the cost of capital and its access is an issue for MSME exporters. While there is a subvention scheme but the sector still needs more access to capital. The refund guarantee by ECGC to banks will offer large support to exports by MSMEs. Also, refund automation for the input tax credit will ease out some liquidity pressure for the exporters with more access to the working capital,” FIEO Director Prashant Seth told Financial Express Online.

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Commerce minister Piyush Goyal had last week highlighted the ‘not satisfactory’ growth in exports this year despite the country’s huge export potential “due to the trade dispute between the US and China which has provided a window of opportunity to Indian manufacturers,” the minister had said. Piyush Goyal’s comments for exports boost assumes importance for the MSME sector given its share in India’s total exports in FY19 stood at 48.10 per cent as per the information from Directorate General of Commercial Intelligence and Statistics, MSME Minister Nitin Gadkari had said in a written reply in Rajya Sabha in July. The value for MSMEs’ share of exports was $147.4 billion while last year till September MSMEs exported goods worth $78.5 billion.

“Marketing front of MSMEs for exports needs to be improved because the current incentives in the promotional scheme is roughly around Rs 300-400 crore but this is very minuscule given the size of the MSME sector,” said Seth adding that apart from marketing, the focus also has to be on the training, capacity building and research & development for MSME exports. “In the global scenario, we are mostly in the low value-added segment. We want to push exports and move up the value chain and for that technology will definitely be needed,” Seth said.

Piyush Goyal had stressed on areas including sweets, saris, perfumes, utensils, that are unique to India’s various states in terms of export potential.

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