The government has extended the interest equalisation scheme on pre- and post-shipment rupee export credit for one more month till September 30 to promote the country’s outbound shipments. The scheme helps exporters from identified sectors and all MSME manufacturer-exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds.
“The scheme will end on September 30. We have requested for it to be extended for five years. If there is no interest equalization scheme, then we will lose some markets and some orders,” said Ajay Sahai, FIEO, Director General at an event where the organisation inked a memorandum of understanding (MoU) with Stenn, an online platform for financing small and medium-sized enterprises (SMEs) engaged in global trade.
FIEO President Ashwani Kumar said that 57% of the production in India is done by MSMEs, which are facing financing problems.
Continuation of the scheme assumes significance as exports grew 15% in rupee terms between 2021-22 and 2023-24 but the outstanding credit in March 2024 dropped by 5%, according to exporters.
The scheme is fund-limited, and benefits to individual exporters are capped at Rs 10 crore per annum per IEC (Import Export Code).“Liquidity is a big concern for Indian exports. Demand for credit has increased because of an exponential rise in sea and air freight, and longer voyage time because of which payments happen late,” Sahai said, adding that the gap between exports and export credit is widening.Sahai said that India’s exports need to grow 12% CAGR to reach $2 trillion exports by 2030.
“Despite global challenges, we will reach there,” he said, adding that the China+1 strategy is attracting both trade and investment into India and the US’ policy of
bypassing China should benefit India.
China is slowing down with purchasing power reducing. The environmental norms are getting stricter because of which industries are moving away from coasts because of which logistics costs are going up. China is moving away from labour intensive exports to value added exports, the organisation said.
MoU signed
The MoU seeks to provide financial solutions to address liquidity challenges and enhance the competitiveness of Indian businesses especially SMEs in the global marketplace.
“This collaboration seeks to drive export growth by equipping SMEs with the necessary financial tools to scale their operations and seize international opportunities,” Kumar said.
At present, only 15% of SMEs’ addressable credit needs are met by formal channels.