According to FIEO, the value of export credit outstanding has come down to Rs 2,17,406 crores in the March 2024 quarter from Rs 2,27,452 crores in the same quarter last year. Exporters will raise the issue of “declining bank credit” to exporters at the Board of Trade (BoT) meeting that will be held on Friday in Mumbai along with other problems faced by them due to disruption in global logistics and emerging demand situation. The BoT will be the forum to raise the issue of declining credit to the export sector, as it would see participation of Deputy Governor of Reserve Bank of India, officials from Department of Financial Services and bankers, Director General and Chief Executive Officer of Federation of Indian Export Organizations, Ajay Sahai said.
The board – which is headed by Commerce and Industry Minister, Piyush Goyal – has secretaries from Department of Promotion of Industry and Internal Trade, shipping, road transport and highways, revenue, agriculture, MSMEs, economic affairs and civil aviation. CEO, NITI Aayog, heads of Central Board of Indirect Taxes and Customs, Export Credit Guarantee Corporation, EXIM Bank are other official members. The Board also has 29 non-official members and representatives of FIEO, business chambers and commodity boards among others.
While exports grew by 15% in rupee terms between 2021-22 and 2023-24, the outstanding credit as in March 2024 dropped by 5% over March 2022, according to exporters. This decline has come despite the sector’s need of more credit for longer duration due to hike in prices of commodities, sharp spurt in freight costs (both sea and air) and the Red Sea crisis leading to longer voyage time and delayed payment.
Another issue related to export credit is the fate of Interest Equalization Scheme which expired on June 30 and was extended on a monthly basis till this month-end in a diminished form. The scheme is now available only to MSME manufacturers, who also export. The exporters want another five-year extension of the scheme with the increased interest subsidy of 5% from 3% that existed prior to June. At the last BoT meeting in January, the initiation of work on Trade Connect e-Platform was announced. The platform was inaugurated on Wednesday. On Wednesday the export promotion organizations had a meeting with the Minister of Commerce and Industry and officials where the stock taking exercise of the export performance so far in this financial year was undertaken. The exporters and the government discussed the headwinds that have emerged due to fall in crude oil prices and similar decline in prices of metals and agri commodities as compared to last year.
The issue of disruptions being faced in logistics due to shipping lines skipping Indian ports persist and is creating problems for exporters to send their products out. The problem of the increased sea transit times due to the Red Sea crisis has been aggravated by increased travel times, the tariff increase on Chinese products in the US and North America. To beat the deadline of higher tariffs and in anticipation of Donald Trump coming back to office as President, the Chinese have been trying to ship as many products as they can. “This has led to container shortage at some Indian ports. We asked the Government for help in the movement of containers over land from ports with surplus to ports where there is shortage,” Sahai said. He also said another challenge that has appeared on the horizon for exports is the hints of showdown in some North American and Asian markets. “We will raise this issue during the meeting of the exporters community with the Minister,” Sahai said adding given a consistent decline in credit to exporters during recent times, the RBI should consider prescribing a sub-target for export credit within the existing 40% target for priority sector lending (PSL). He added that this suggestion is worth considering as despite exports being under PSL, the flow of credit has not improved. It was Rs 11,721 crores on June 28 this year, as against Rs 19,861 crores on July 1, 2022.
