Exporters are also dealing with high credit costs, which have become more problematic as freight rates have surged due to geopolitical tensions in West Asia. This has forced ships to take longer, more expensive routes. Data shared with Commerce and Industry Minister Piyush Goyal indicated that outstanding export credit dropped from around Rs 2.3 lakh crore in March 2022 to under Rs 2.2 lakh crore by March 2023, even though exports in rupee terms rose by 15%.
Exporters have expressed frustration with the expenditure department for not extending the interest subsidy scheme beyond September and for failing to provide future guidance to help price their products accordingly. These issues have led the Directorate General of Foreign Trade (DGFT) to hire consulting firm EY for an in-depth analysis and to explore multiple solutions.
A comprehensive approach is planned to address the financial challenges exporters face. One concern is that the Export Credit Guarantee Corporation (ECGC) does not fully meet the needs of the business and trade sector. The ECGC covers $80-90 billion, but merchandise export coverage needs to be around $450 billion. A policymaker remarked, “Why is it not expanding its footprint, maybe, the time has come to review its monopoly.”
Factoring services, which allow businesses to sell their account receivables to a third party at a discount to meet cash requirements, are also underutilized and remain on the periphery.
(With ToI inputs)