NEW DELHI: With orders drying up in the Western markets and buyers asking for longer credit periods, domestic merchandise exporters are looking at th
e government for help. The long list of demands put out by the Federation of Indian Export Organisations (Fieo) to the government includes providing cheaper credit to exporters for a longer period and providing guarantees to banks to encourage them to lend to exporters.
Exports from labour-intensive sectors have witnessed a sharp decline over the last seven months with tea going down by 20%, handicrafts by 70%, carpets by 32%, oil meals by 50%, man-made yarn by 17%, cotton yarn by 19% and marine products by 19%, figures collated by the Fieo reveal. Official figures released by the commerce department show a sharp deceleration in export growth to 10% in September against 34% in the April-August 2008 period.
Commerce & industry minister Kamal Nath had said earlier this week that the government would soon come out with a package to bail out exporters.
Since buyers in the Western markets do not have adequate cash to make timely payments, exporters point out that they are in urgent requirement of cheaper credit for a longer time period. Fieo has demanded that the rate of export credit should be linked with Bank Rate instead of benchmark prime lending rate. Such export credit should be made available at bank rate + 100 basis points.
Pre-shipment and post-shipment credits in foreign currency should be made available to exporters at Libor + 100 basis points as stipulated by the Reserve Bank of India. RBI should issue directives to banks to provide such credits to exporters.
Post-shipment credit, which is available only up to 90 days, should be provided for a tenure of 270-365 days, keeping in view the financial crunch faced by overseas buyers, thus demanding longer credit period, Fieo said.
Source : The Economic Times