New Delhi: The government on Wednesday widened and extended the interest subsidy on bank loans for labour intensive-sectors to boost exports that contracted for seven months in a row until November.
Trade minister Anand Sharma said the 2% interest subsidy was being extended by a year till 31 March, 2014, and specific engineering industry subsectors such as iron and steel, and electrical transformers were being included as beneficiaries of the scheme to preserve their competitive edge.
Until now, the subsidy has been available to sectors such as handicrafts and handlooms, carpets, readymade garments, processed agriculture products, sports goods and toys apart from small-scale industries.
India’s exports contracted 5.95% to $189 billion in the first eight months of the fiscal till November, as the fragile US recovery and the euro zone debt crisis hurt demand for products and services from Asia’s third largest economy. Imports shrank 1.6% to $318.7 billion, leaving a trade deficit of $129.5 billion.
Sharma said in the current scenario, it would be difficult to achieve the export target of $360 billion in the current fiscal. “Our effort will be to stabilize and move exports to positive territory in the fourth quarter (January-March),” Sharma said. He refused to set a new exports target for the current fiscal.
To encourage project exports from India, the commerce ministry introduced a pilot scheme by extending the interest subsidy scheme for project exports through EXIM Bank for countries in the South Asian Association for Regional Cooperation (SAARC), Africa and Myanmar. SAARC groups Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka.
“This scheme will become operational immediately for a combined worth of $500 million, to begin with. The objective of the scheme is to boost India’s exports in these countries by providing long-term concessional credit through EXIM Bank, as co-financing in infrastructure sectors such as drinking water, housing, irrigation, road projects, renewable energy,” Sharma said.
To reverse the downtrend in exports and to curb the rising trade deficit, the commerce ministry also announced incentives for incremental exports made during the fourth quarter of the current fiscal (January-March) over the same period last year for shipments to the US, the European Union and Asia.
“This, however, would not include deemed exports, service exports, third-party exports and export turnover of special economic zone units,” Sharma said.
The extension of interest subsidy for one more year will provide stability to exporters, said M. Rafeeque Ahmed, president of the Federation of Indian Export Organisations (FIEO).
“The initiative for pilot scheme for promoting project exports will help India push its merchandise and services exports as well. Looking at opportunities in the Middle East, Iran, Iraq and Africa, project exports can emerge as one of the very important sectors of Indian exports,” he said.
The commerce ministry also extended the focus market scheme under which duty credit of 3% of export value is reimbursed, to five new countries—New Zealand, the Cayman Islands, Latvia, Lithuania and Bulgaria. Both the market-linked focus product scheme and focus product scheme were also expanded to include engineering, textiles and pharmaceuticals products among others.
Apparel Export Promotion Council chairman A. Sakthivel said the inclusion of textiles in the scheme will help in boosting the exports to non-traditional markets and help in product diversification. “We are already targeting the newer markets and the buyers’ response is positive in the new countries,” he added.