Indian exporters seek extended interest subsidy and permanent duty rebates

The Federation of Indian Exporters Organisation (FIEO) has sought the continuation of the interest equalisation scheme beyond 30th September to allow businesses to enter contracts with buyers for over six months. Speaking to CNBC TV18 after signing an MoU with fintech platform Stenn, FIEO’s Director General, Dr. Ajay Sahai, pointed out that the cost of credit in India is comparatively higher than in other countries, as reflected in key interest rates.

He stated that while an exporter can obtain credit in the US at rates between 5.25% and 5.5%, with the Fed rate at 4.75% to 5%, it is not possible to access credit in India even at 9% with a repo rate of 6.5%. Sahai also advocated for a permanent extension of the RoDTEP scheme to continue supporting exporters.

The MoU with Stenn aims to address liquidity concerns for Indian exporters by providing an alternative post-shipment credit solution to offset the decline in export credit as a percentage of exports. Under the MoU, exporters can receive up to 90% of the invoice value, capped at $15 million, along with credit on a post-shipment basis and credit insurance.

Also read: India’s trade deficit widens in August as exports fall and imports hit a record high

While Sahai noted that issues around container shortages are easing as more ships join the supply chain, he observed that freight charges, although softening, remain high in some destinations compared to 2022. Exporters are hoping for further reductions in freight costs and smoother logistics, but Sahai also expressed concerns over the impact of ongoing global conflicts on trade and the economy.

Attributing the decline in exports in August 2024 to lower crude oil prices, Sahai explained that although India benefits as an importer, falling crude prices negatively impact exports. With petroleum products accounting for 20% of India’s export basket, a 35% price drop has led to a 7% decline in overall exports.

While highlighting challenges for labour-intensive sectors, he noted that India’s export profile is evolving towards more knowledge-based and technology-driven exports.

Discussing the situation in China, Sahai pointed to a loss of manufacturing competitiveness as wages stagnate without corresponding productivity gains. He added that stricter environmental norms have forced companies to move from coastal areas to the interior, raising logistics costs. He concluded that China’s shrinking workforce presents an opportunity for several countries, including India, to expand or retain market share.