Ministry proposes $5-b fund to boost resources for export
Credit
The Commerce Ministry has proposed a $5-billion trade finance facility to augment
resources for the export sector. This facility may roll out within the first 100 days
of the new UPA Government.
Highly placed sources in the Commerce Ministry said that a fund may be created by
the Reserve Bank of India for ensuring increased and timely flow of export credit.
"It is at a proposal stage. The idea is to create a fund that commercial banks could
dip into for augmenting their trade finance activities," sources said.
The SME sector, which is the backbone of Indian exports, has been plagued by
demand slowdown and is reeling under liquidity pressures due to the global financial
meltdown.
The common complaint among export fraternity is that banks are shying away from
providing export credit and prefer parking their funds in RBI’s reverse repo window,
albeit at lower returns for their funds.
The country’s merchandise exports had recorded a decline for six months in a row up
to March 2009. The same trend is expected to continue even for April (official data to
be released on June 1).
India's merchandise exports grew 3.4 per cent in dollar terms to $168.7 billion
during 2008-09, a tad short of the scaled down target of $170 billion.
According to industry estimates, export credit from the banks (excluding the foreign
banks) declined 17 per cent during September-March 2008-09 as compared with the
same period in the previous fiscal. Even as a proportion to total non-food credit,
export credit has been at low single digit (about 5.2 per cent at end March 2009).
The quantum jump in housing loans as well as auto loans in the domestic market in
the recent years has also dented bankers’ interest in the export sector.
On their part, bankers contend that the policy makers should tackle the demand
issue and that exports are being affected by the recession in developed markets.
Govt measures
The Government had over the last one year announced a number of measures to
tackle the exporters' woes.
These include provision of pre-shipment and post-shipment credit at competitive
rates, extension of duty neutralisation scheme and also a committee to look into the
procedural problems faced by exporters.
In the interim budget 2009, interest subvention of 2 per cent on pre-shipment and
post-shipment export credit was extended by six more months from March 31 to
September 30, 2009.
The sectors that got this benefit were textiles, carpets, leather, gem and jewellery and marine products.
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