Amidst fears that the escalation in geopolitical tension may impact India’s exports in the first quarter of 2024-25 due to its impact on global demand, the government is reportedly finding ways to increase the competitiveness of domestic exports and has started examining the export credit landscape. According to the Economic Times report, the Commerce and Industry Ministry has sought details on exporters’ financial needs, challenges faced in accessing export credit, and the ways to improve it. India gives pre- and post-shipment export credit to enable exporters to access financial resources that are vital for promoting global trade.
The media report quoted an official, as saying, “The exercise aims to look at effective interventions as many exporters encounter difficulties in utilising these export credit facilities.”
The ministry has sought details on specific blockages in the existing export credit mechanisms that need to be addressed and the best practices from other countries that could be adapted to improve the export credit landscape in India.
The global uncertainties resulting from the Russia-Ukraine crisis impacted India’s outbound shipments which fell 3.11% to USD 437 billion in 2023-24.
Recently, Ajay Sahai, director general of the apex exporters body Federation of Indian Export Organisations (FIEO) said, “If the global situation continues to be like this, it will impact global demand. In the first quarter numbers, the demand slowdown may be visible.”
“There is almost a 5% difference between the cost of export credit in India and countries like China, Vietnam, and South Korea, which impacts the competitiveness of our exports,” he added.
Exporters anticipate a demand slowdown in the wake of global uncertainty and hence need funds for a longer period. Officials said specific intentions could be considered to facilitate the access to export credit once the exercise is over.
Export credit includes priority sector lending and an interest subvention scheme, which enable exporters of 410 products and all MSME exporters to get bank credit at a subsidized rate of 2-3%.
FIEO president Ashwani Kumar has sought an extension of the interest subvention scheme. According to Kumar, the scheme has become more relevant today as buyers request longer periods of credit due to a slowdown in demand and offtake from the shelves.
Also read: What Is Export Credit Guarantee Corporation (ECGC) And How Is It Important For MSME Sector?
