A worried Union 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.
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.
Officials, who did not wish to be identified, said the government is considering to announce an additional one percentage point interest rate subsidy (two percentage points were offered earlier) in credit to leather manufacturers, marine products, textiles and handicrafts in the full budget for 2009-10 to be presented on July 6.
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 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 two 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.
An official also said the service tax exemption net for exporters could be widened to help traders reduce transaction cost stay competitive in the world market. At present exporters are exempted from paying tax on about 10, services such as those rendered by ports, road transport, railways and warehouses.
A recent United Nations Conference on Trade and Development (UNCTAD) study showed that there could be net employment loss 7.5 jobs in the export sector in 2009-10 due to shrinking world demand.