Indian Government Mulls 5-Year Extension of Export Credit Support Scheme

The Indian government is considering extending a crucial export credit support scheme to enhance the competitiveness of the country’s export sector, which has been significantly affected by a slowdown in developed nations, according to sources close to the matter.

In the upcoming budget, there is a proposal to extend the scheme for pre- and post-shipment rupee export credit by an additional five years. The commerce and industry ministry has suggested extending the interest equalisation scheme, set to expire on June 30. This scheme provides a 3% benefit to manufacturer micro, small, and medium enterprises (MSMEs) and a 2% incentive to exporters of 410 identified tariff lines.

An unidentified official mentioned that while there might be minor modifications, the overall structure of the scheme is expected to remain the same. The final decision on this proposal will be made by the finance ministry. Since 2021-22, the government has allocated ₹9,538 crore to the scheme, with an additional ₹2,500 crore allocated in December of the previous year.

The scheme allows individual exporters to access bank credit at a subsidized interest rate, with a cap of ₹10 crore per annum per import-export code. Initially, banks provide the subsidy, and the government later reimburses them for their lower interest earnings. Exporters use this scheme to reduce their credit costs, thereby enhancing their competitiveness.

Industry leaders have requested an increase in incentive rates to 5% for MSMEs and 3% for exporters of the 410 products. However, the official indicated that these benefits are unlikely to be altered.