The Cabinet’s approval for a Rs 45,060 crore package that will see return of the interest subsidy scheme and enhanced credit guarantee for exporters can bring down cost of credit by 2-3% and offer some relief, but may not fully address tariff and other challenges they face, according to industry and experts.
The Credit Guarantee Scheme covers 20% of the sanctioned limit making it collateral-free thereby reducing the interest rate for such exporters. The Interest Equalisation Scheme (IES), announced as part of the 6-year Export Promotion Mission (EPM), will cover the entire working capital requirement, and provide 3% subvention.
“While the overall interest burden will come down over 3%, the flow of credit will increase substantially, which is the need of the hour as well. While it may not address the issue of tariff challenges, it will help in diversification and overall reduction in the burden on our Micro Small and Medium Enterprises (MSMEs) in particular,” director general and CEO of Federation of Indian Export Organisations Ajay Sahai said.
As many MSMEs depend heavily on Letter of Credit (LC) discounting for liquidity — where rates currently average from 7–10% depending on the bank, tenor and credit profile — this reduction could effectively bring their working-capital cost down to around 5–7%, offering immediate relief through cheaper finance and quicker cash flow.
“Credit cost is only one lever, exporters continue to face weak global demand, volatile freight rates, geopolitical risks and payment delays. The support may improve short-term liquidity, but sustaining export momentum will require diversifying into alternative markets, leveraging India’s expanding FTA network, and ensuring smoother domestic trade facilitation.” Partner and Tax Controversy Management Leader at Grant Thornton Bharat, Manoj Mishra said.
Some exporters are waiting for the fine print of the interest subsidy scheme under the IES to firm up their view. For starters they want that the benefit per exporter available under the scheme should be large enough to be meaningful. The cap of Rs 50 lakh per exporter would be meaningless, they said. Earlier the cap for benefits per exporter per year used to be Rs 10 crore. In its last extension this limit was brought down to Rs 50 lakh.
“A 3–5% reduction in the cost of credit will definitely provide meaningful relief — especially for MSMEs that operate on thin margins. It will ease liquidity pressures, improve working capital availability, and help sustain export orders,” chairman of Gems and Jewellery Export Promotion Council (GJEPC) Kirit Bhansali said.
However, given the current global headwinds — such as sluggish demand, rising input costs, and trade uncertainties — credit cost reduction alone may not be sufficient. It must work in tandem with other EPM measures like export promotion grants, trade fair participation support, and branding assistance, he added. The Gems and Jewellery sector is the most impacted by the 50% additional tariffs in the US.
The apparel sector is also among sectors taking maximum brunt of US tariffs. “Enhanced credit guarantee will empower thousands of apparel exporters—especially MSMEs—by easing access to affordable finance and enabling them to expand production, invest in technology, and explore new markets,” secretary general of Apparel Export Promotion Council Mithileshwar Thakur said.
Some experts have suggested more fiscal commitment from the government to bridge the gap in tariffs they face with competitors in the US market. “The current disability faced by exporters varies from anywhere between 10-15% even after implementation of credit guarantee and interest subvention schemes launched recently. These have to be complemented with fiscal interventions to ensure India remains competitive in the export market,” Director – Regulatory at Nangia Group Mayank Arora said.
The fiscal incentives can take the form of bringing back direct tax incentives for Special Economic Zones (SEZs) and higher incentives to exporters under Remission of Duties and Taxes on Exported Products (RoDTEP). Of the total support, the EPM has been granted Rs 25060 crore for six years and credit guarantee scheme has been given Rs 20,000 crore till March 2026.
The financial resources do not match the mission’s ambition, founder of Global Trade Research Initiative (GTRI) Ajay Srivastava said. The Mission’s total outlay of Rs 25,060 crore over six years means less than Rs 4200 crore per year.
Last year alone, the Interest Equalisation Scheme cost more than Rs 3,500 crore, leaving very limited funds for the many activities, such as branding, packaging, trade fairs, compliance, and logistics, he added.