The Engineering Export Promotion Council of India (EEPC) on Thursday expressed its concern over a sharp annualised drop of over 54 per cent in the gross bank credit deployment in the export sector.
Urging the Reserve Bank of India (RBI) and the Centre to ensure timely and less expensive credit for them, the EEPC also called for resolving issues like closure of over two-year-old shipping bills.
"A look at the latest Reserve Bank of India (RBI) data up to October-end, 2018, conveys the kind of issues being faced by exporters when it comes to credit. Against a gross credit deployment of Rs 434 billion till end October, 2017, the figures dropped by 54.6 per cent year on year to Rs 197 billion in 2018.
"While there may be several global factors such as trade war between the US and China, and uncertainties over Brexit hitting the export demand, the cost of credit remains a big concern for us," said the export body Chairman Ravi Sehgal.
He, however, said that the recent decision by the Union Cabinet to include merchant exporters into the interest rate equalisation scheme would provide some relief to the sector.
The Cabinet Committee on Economic Affairs (CCEA), on January 2, had given its approval to the proposal of the Department of Commerce for including merchant exporters under the Interest Equalisation Scheme (IES) for pre and post shipment rupee export credit by allowing them interest equalisation rate of 3 per cent on such credit for export of products covered under 416 tariff lines identified under the scheme.
These products are largely in the MSME labour-intensive sectors such as agriculture, textiles, leather, handicraft, machinery, etc. The proposal would entail benefits of around Rs 600 crore to exporters on interest equalisation, for the remaining period of the scheme, EEPC said.
"Subdued flow of credit is also seen in the engineering segment, as per the RBI data. The year-on-year growth of the bank credit to the engineering sector itself could grow merely by 4.6 per cent by the end of October 2018. Credit is the lifeline of the industry and exporters and the situation needs to be addressed sooner than later," said Sehgal.
Besides, exporters are facing a lot of problem arising out of the RBI instructions to banks not to honour shipping bills older than two years, under the Export Data Processing and Monitoring System, it said.
"Ironically, these irritants are surfacing at a time when the going is difficult in the global market due to trade tensions between the US and China and other issues like Brexit," he added.
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