NEW DELHI: The government is likely to extend interest rate subvention or subsidy available to exporters from select sectors on their borrowings
beyond March 31, 2009.
The 2% interest subsidy could be extended for another nine months up to December 31, 2009, a government official said. The step is part of the series of incentives which the UPA government is likely to announce as part of the vote-of-account this month in its last attempt to prop up the economy.
In December last year, the Reserve Bank of India (RBI) had extended interest rate subvention available to seven export sectors till March 31, 2009.
The facility allows exporters of textiles, handicrafts, leather, marine products, gems & jewellery, carpets and small & medium enterprises to borrow money from banks at 2% lower interest than what is charged of other export sectors. The banks are reimbursed the subsidised interest amount by the government.
However, availability of subvention is subject to the condition that the interest rate should not fall below 7%, which is the rate applicable to the agriculture sector under priority sector lending.
With exports from the country falling into the negative territory in the last few months, exporters have made a strong case for continuation of interest rate subvention. In fact, exporters’ body Fieo has demanded that subvention should be given to some additional sectors like tea, basic chemicals, engineering goods, jute, plastics and linoleum.
The gems & jewellery sector, which has suffered a sharp decrease in exports due to falling demand in international markets, has sought an increase in the subvention rate from 2% to 4%.
“While an extension of the interest subsidy available to exporters till March 31 this year is definitely on the cards, it could prove to be a little difficult to push the other demands through. However, we are trying to get as much as possible for the export sector,” a commerce department official told ET.
With the recession in the Western markets set to deepen in the coming fiscal, India’s export prospects look bleak in the new fiscal as well.
Source : The Economic Times