The decision is to boost overseas shipments and this decision was taken at a meeting of Cabinet Committee on Economic Affairs headed by Prime Minister Narendra Modi. Further, in a bid to arrest the decline in exports, the Central government has announced an Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on pre and post shipment rupee export credit with effect from 1st April, 2015 for five years. The scheme covers mostly labour intensive and employment generating sectors like processed agriculture and food items, handicrafts, handmade carpet (including silk), handloom products, coir and coir manufactures, jute raw and yarn, ready-made garments etc. Fabrics of all types, toys, sports goods, paper and stationary, cosmetics and toiletries, leather goods and footwear, ceramics and allied products, glass and glassware are also included. Medical and scientific instruments, optical frames, lenses, sunglasses, auto components industrial machinery, electrical and engineering items, manufactured by SMEs are also covered.
It has been indicated that the financial implication of the proposed scheme is estimated to be in the range of Rs 2,500 crore to Rs 2,700 crore per year. However, it added that the actual implication would depend on the level of exports and the claims filed by the exporters with the banks. The funds worth Rs 1,625 crore in the non-plan head of account are available under Demand of Grants for 2015-2016 and would be made available to the Reserve Bank, the commerce ministry stated. It has been revealed that the scheme would be available to all exports of Micro, Small and Medium Enterprises (MSME) and 416 tariff lines. But it would not be available to merchant exporters. It is believed that this will give a big boost to exports particularly for the MSME sector, handicraft, Agri-products and food processing as it was highlighted by the Power Minister Piyush Goyal after the Cabinet meeting. It was also informed that the previous government had discontinued the interest subvention scheme, which has made the country’s exports uncompetitive. Under this scheme, exporters get loans at affordable rates, which will help them to ship more goods to foreign markets. The rate of interest equalisation would be 3 per cent.
Terming the announced scheme as a long-awaited Mr S.C. Ralhan, President, Federation of Indian Exporters Organisation (FIEO), told that the scheme would provide stability and will help exporters in pricing their product to make it more competitive. Further, credit cost has become all the more important as the cycle of exports has elongated due to global contraction in demand and liquidity forcing the exporters to borrow for longer periods. The scheme will be evaluated after three years.
It was stated that while this scheme was funded from the funds available with Department of Commerce under non-plan head during 2015/16. However, the restructured scheme would be funded from plan side from 2016/17 onwards.
Further, in this regard, it was reported that India’s exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53 per cent to USD 21.35 billion due to a demand slowdown, although trade deficit showed some improvement.