The upcoming budget is likely to give a boost to exports of value-added products, especially those that are not labour intensive, by offering them rupee export credit at competitive rates.
Currently, only micro, small and medium enterprises (MSMEs) benefit from incentives under the Interest Equalisation Scheme. However, these benefits are capped at Rs 50 lakh against Rs 10 crore earlier. Most of the goods they make are labour intensive.
Otherwise, the benefits for 410 products, called tariff lines in trade parlance, ended on December 31. “The number of products which get the interest equalisation benefits may be reduced overall and a greater emphasis could be given to value-added products,” said an official.
The budgetary allocation for the scheme was Rs 3,488 crore in FY22, Rs 3,118 crore in FY23 and Rs 2,932 crore in FY24. Finance minister Nirmala Sitharaman will announce her budget at the start of February.
She will unveil the Narendra Modi government’s economic agenda that aims to bolster growth in order to achieve the developed country goals of Viksit Bharat 2047.
India is looking at sunrise sectors for exports and products such as cotton yarn and rice may be dropped from the list of those eligible for benefits to pave the way for the inclusion of value-added items, according to the official.
“If the scheme is extended to the value-added segment, it will help establish the country as a brand besides leading to job creation and export promotion,” said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO).
Exporters have sought an extension of the scheme as goods exports contracted 4.85% in November. The scheme helps exporters from identified sectors and all MSME manufacturer-exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. The scheme is crucial as the credit cost in India is generally 5-6% more than that of other countries.
FIEO has proposed that for MSMEs, the subvention applied should be 5%, against 3% now.