Amid a persistent decline in export credit, commerce and industry minister Piyush Goyal on Thursday said the government would soon announce guidelines for extending foreign exchange credit to exporters. Such foreign exchange loans will be made available to exporters at very competitive rates, likely to be lower than even 4%, he said.
Addressing the Board of Trade meeting here, Goyal said: “We are concerned that it (export credit) has fallen, and (we) will come up with the contours of a vibrant programme soon, which will particularly support micro, small and medium enterprises.”
The bankers are on board and “…we shall shortly be coming out with the contours that have been finalised between the RBI, the finance ministry and the commerce ministry,” Goyal said. Outstanding export credit dropped 23% in the last fiscal to Rs 9.57 lakh crore, from Rs 12.39 lakh crore a year earlier. Amid renewed focus on protecting the domestic industry from irrational surge in imports, the commerce ministry would notify new anti-dumping rules this month, Goyal said.
The ministry is eyeing an export target (both goods and services) of $1 trillion in the next five years, compared with $537 billion in 2018-19. For this to materialise, the country needs to increase local production, improve competitiveness and bring in domestic reforms to remove any export road blocks, Goyal said.
The commerce ministry will soon come out with a credit scheme for exporters with enhanced insurance cover of up to 90%, instead of the current 60%. It will provide comfort to lenders, he said. Recently, Goyal had held a meeting with senior public sector bankers to push for greater flow of loans amid expectations that the government would soon announce a slew of steps to boost faltering export growth.
According to RBI data, banks’ export credit shrank 36.1% year-on-year as of June 21, even on a low base (it had contracted 42.7% a year earlier). This is despite the fact that non-food bank credit grew 11.1% y-o-y as of June 21 and overall priority-sector loans rose 10.2%. Contraction in such credit flow has forced many MSME exporters to shut shop at a time when a global trade war has already threatened to drag down both economic and export growth, the industry has told the government. Merchandise export growth collapsed to just 0.6% in April, 3.9% in May, (-)9.71% in June and 2.2% in July.
The commerce ministry has already circulated a proposal to phase out the flagship Merchandise Exports from India Scheme (MEIS) with a more WTO-compatible regime under which various state and central levies on inputs consumed in exports will be reimbursed.
The Board of Trade meeting was also attended by Union ministers Hardeep Singh Puri and Som Parkash, NITI Aayog chief executive Amitabh Kant, commerce secretary Anup Wadhawan and DPIIT secretary Guruprasad Mohapatra and director general of foreign trade Alok Vardhan Chaturvedi.
