Commerce Ministry Pushes For Collateral-Free Financing To Aid MSME Exporters
Date
12/19/2024 2:09:20 PM
(MENAFN- KNN India)
New Delhi, Dec 19 (KNN)
High interest rates are significantly hampering India's export competitiveness, prompting the commerce Ministry to seek collaborative solutions with the finance ministry, senior officials disclosed on Wednesday.
Director General of Foreign Trade Santosh Kumar Sarangi revealed ongoing efforts to demonstrate the crucial role of the Interest Equalisation Scheme (IES) in maintaining manufacturing competitiveness.
The stark interest rate differential between India and its competitors presents a notable challenge, with India's repo rate standing at 6.5 percent compared to 2.5-3.5 percent in Southeast Asian nations.
This disparity particularly affects Micro, Small, and Medium Enterprises (MSMEs), as studies indicate that stringent collateral requirements by financial institutions create substantial barriers to accessing institutional finance and entering export markets.
The Interest Equalisation Scheme, initiated on April 1, 2015, provides critical support to exporters through subsidies on rupee export credit for both pre- and post-shipment phases.
Originally planned for five years, the scheme has undergone several extensions, including during the Covid-19 period, with recent modifications capping individual exporter benefits at Rs 50 lakh per Import Export Code, down from the previous Rs 10 crore limit.
The commerce department is actively working with the department of expenditure to explore solutions for collateral-free or subsidised collateral arrangements for MSMEs.
With the current scheme set to expire on December 31, negotiations continue with the finance ministry to underscore its significance in facilitating stronger global market integration for Indian exporters.
The urgency of these discussions is highlighted by recent trade data showing a 4.85 percent year-on-year decline in November exports to USD 32.11 billion, while the trade deficit reached a historic high of USD 37.84 billion, driven by unprecedented gold imports.
The situation underscores the critical need for supportive measures to enhance export competitiveness, particularly for the MSME sector facing global economic headwinds.
(KNN Bureau)
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