Exporters body FIEO Friday said interest subsidy increase from 3 per cent to 5 per cent will provide competitiveness and a level-playing field to MSME exporters.
Federation of Indian Export Organisations (FIEO) President Ganesh Gupta said this is a timely move and it will help the exporters to get credit at competitive rates.
"Coming at a time when interest rates are moving northward, the deeper support of 5 per cent would provide much needed relief to the MSMEs (micro, small and medium enterprises) exporters who were burdened by increasing cost of credit," Gupta said.
He also said banks should now move pro-actively to increase the flow of credit as there is an about 50 per cent drop in export credit in August as compared to the same month last year.
"The outstanding export credit in August 2017 was Rs 41,500 crore which dropped to Rs 20,500 crore in August this year," he added.
The government announced several steps including increasing interest subvention on preshipment and post-shipment credit for MSME exporters from 3 per cent to 5 per cent with a view to promote shipments.
MSMEs contribute about 40 per cent to India's total exports.
India's exports entered the negative zone after five months, contracting 2.15 per cent in September to USD 27.95 billion due to dip in shipments in key sectors including engineering and gems and jewellery even though trade deficit narrowed to a five-month low.