New Delhi, May 24 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.
Source : Business Line