India could lower the subsidy it offers exporters to meet their need for cheap funds, a move that will impact small and medium exporters in labour-intensive sectors. It may reduce the subsidy on interest provided on pre- and post-shipment export credit, under the Interest Equalisation Scheme, to 2-3% from 3-5% now.
The scheme, which lapsed on September 30, is likely to be re- new edition and an announcement is expected before Diwali. The moves come on the back of booming exports, which grew 21.35% year-on-year to $33.44 b said on billion in September. Discussions are on between the finance ministry and the commerce & industry ministry s for renewing the scheme, officials said. “
Interest rates have declined substantially in the country from the levels when the scheme was rolled out. So, a re-look is important,” an official. Introduced April 1, 2015 for five years in the Foreign Trade Policy 2015-20, the interest equalisation scheme is a key support programme for medium, small and micro exporters. The government aims to clock a record $400 billion of merchandise exports in FY22.
Exporters of 416 identified pro ducts are also eligible for the benefit. In November 2018, the interest subsidy was increased to 5% from3% to boost MSME sector exports. Later, the government included other merchant exporters of 416 items too under the scheme and allowed them interest equalisation at the rate of 3% on credit for the export of certain products. The talks are in advanced stages and an announcement is expected by Diwali,” said another official. However, trade experts said such a move will hurt cash- strapped small exporters as banks provide loans to them by way of pre- and post-shipment rupee export credit.
