The government on Wednesday decided to provide 3 percent interest subsidy to merchant exporters to enhance flow of funds for them with a view to boosting outbound shipments.
The decision was taken by the Cabinet Committee on Economic Affairs.
"The proposal will entail benefits of around Rs 600 crore to exporters on interest equalisation for the remaining period of the scheme," an official release said.
Approval has been given to the proposal of the Department of Commerce for "including merchant exporters under the interest equalisation scheme for pre and post shipment rupee export credit by allowing them interest equalisation rate of 3 percent on such credit for export of products covered under 416 tariff lines (products) identified under the scheme," the release said.
These products are largely in MSME/labour-intensive sectors such as agriculture, textiles, leather, handicraft and machinery.
It added that inclusion of merchant exporters in the scheme is expected to make the exporters more competitive, encourage them to export more products manufactured by MSMEs.
"Additional exports by them will increase production by MSME giving a fillip to employment generation as MSME are generally in the employment-intensive sectors," it added.
Commerce Minister Suresh Prabhu has time and again raised the issue of declining export credit. He had suggested that loans to exporters should be considered as priority sector lending by the banks.
There was a sharp decline in export credit is impacting exporters in general and MSME units in particular.
Citing RBI data, the commerce minister had stated that outstanding export credit has come down to Rs 22,300 crore on June 22, 2018, from Rs 39,000 crore as on June 23, 2017.
Commenting on the decision, Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta said that the move would help in promoting exports.
"Loans at affordable rates would help exporters to promote exports," he said.
During April-November 2018-19, the country's merchandise exports grew by 11.58 percent to $217.5 billion.
Since 2011-12, India's exports have been hovering at around $300 billion. During 2017-18, the shipments grew by about 10 percent to $303 billion.
Promoting exports helps a country to create jobs, boost manufacturing and earn more foreign exchange.
