With exports declining for three consecutive months in an uncertain global market, the Centre is looking at reviving the interest subvention scheme to give select sectors a boost.
The Commerce Ministry is working out the details of the scheme, which would entitle exporters of beneficiary sectors to get credit at a subsidised interest rate.
“The proposal would be first sent for approval of the Expenditure Finance Committee and then the Cabinet Committee on Economic Affairs (CCEA),”an official from the Directorate General of Foreign Trade (DGFT) told BusinessLine.
There is, however, no clarity yet on when the Foreign Trade Policy, which includes incentive schemes to support sagging exports, would be announced.
“Although there is a general expectation in the Commerce Ministry that it will be unveiled on April 1, there is some uncertainty as the Commerce Minister will be out of the country during the month-end,” the official said.
The interest subvention scheme, if finalised, could be announced either as part of the FTP or independently.
“It is part of the non-Plan expenditure of the government and is not directly related to the FTP,” the official added.
While products from the small-scale sector and labour-intensive industries remain in the priority list of items being considered for the interest subvention scheme, sectors that hold potential for growth such as pharmaceuticals and certain engineering items are also in the running, the official added.
The rate of subvention, earlier pegged at 2 per cent, is also to be finalised. “It all depends on the level of expenditure the EFC is comfortable with,” the official said.
The previous interest subvention scheme, that expired last April, included items such as handicrafts, carpet, handlooms, readymade garments, processed agriculture products, sports goods, toys and a few engineering items.
To find out the effectiveness of the previous interest subvention scheme, the government has approached the National Institute of Bank Management, Pune, to do an impact analysis.
Exporters have long been calling for revival of the scheme as cheaper finance could help them retain their share in the increasingly competitive global market.
“Ideally, we would want all sectors to be covered under the subvention scheme because most have taken a hit, but at least the crucial ones, both small and big, need to be included,” said Ajay Sahai from exporters’ body FIEO.
The Commerce Ministry is also trying to analyse the reason for the decline in exports in the last three months.
It is mostly due to a combination of weak world demand, falling value of major currencies such as the Euro and the Japanese Yen, which is making exports dearer.