A worried government is planning a series of fiscal and monetary measures, including a possible cut in interest rates, for embattled exporters struggling to stay afloat amid shrinking world demand.
“We will be making sector specific and policy recommendations to the finance minister for the export sector that can be announced in the budget,” commerce and industry Anand Sharma (56) told reporters on Wednesday.
Exports from the country has contracted for the seventh successive month plunging by 33.2 per cent in April with labour intensive sectors such as handicrafts, gems and jewellery, leather and textile exports being hurt the most.
Finance Minister Pranab Mukherjee (73) will present a full budget for 2009-10 in the first week of July.
Sharma and senior ministry officials have held a series of meetings with export promotion councils and industry representatives during the last few days taking inputs for a turnaround strategy.
The government could offer a higher interest subsidy to make cheaper loans available for beleaguered traders. “Yes, there is a case for lowering interest rates for exporters, particularly labour intensive sectors,” Sharma said.
If implemented, this would entail additional interest rate subsidy over and above the two percentage points offered earlier in credit to leather manufacturers, marine products, textiles and handicrafts.
In March, the government had decided to extend the existing 2 per cent interest subsidy on rupee export credit to certain employment intensive sectors by another six months till September 30, 2009. Under the scheme, banks are offered an interest subsidy of 2 per cent on pre and post shipment rupee export credit, for employment oriented export sectors.
The total subsidy to banks, however, is subject to the condition that interest rate payable by the exporter does not fall below 7 per cent, which is the applicable agriculture sector lending rate. Besides, another set of measures would be unveiled in the five year foreign trade policy in August, Sharma said.