EEPC India has called on the Government of India to reinstate the Interest Equalisation Scheme (IES), ensure affordable export finance, and provide targeted assistance to help exporters absorb part of the punitive tariff recently imposed by the United States on Indian engineering exports.
In a meeting with Reserve Bank of India (RBI) Governor Sanjay Malhotra, EEPC India Chairman Pankaj Chadha highlighted the severe challenges faced by the engineering sector, particularly MSMEs, due to rising borrowing costs and the tariff impact.
“India’s engineering exports to the USA average around USD 20 billion, accounting for nearly 45% of the country’s total engineering exports exposed to US tariffs. This underscores the vulnerability of our sector and the urgent need for government support,” Chadha said.
He urged the government to reinstate the Interest Equalisation Scheme, particularly for MSMEs, or at the very least extend it to SME manufacturing units in the engineering sector. He also raised concerns regarding the difficulty faced by MSME exporters in accessing collateral-free loans, citing high collateral requirements and disproportionate interest rates linked to rigid credit rating norms.
“MSMEs continue to face challenges when seeking finance from banks and financial institutions, where stringent collateral requirements and credit rating practices result in higher costs of borrowing. This not only increases financial pressure but also reduces competitiveness,” Chadha added.
Chadha further noted that the exposure of engineering exporters to the US market has adversely affected their credit ratings and recommended that rating agencies exclude US tariff-related exposure from credit rating calculations, at least for the current year.
During the meeting, EEPC India also flagged that the average duty gap between India and its competing nations stands at around 30%. While the industry is prepared to absorb up to 15% of this burden, Chadha urged government support to bridge the remaining 15%, either through export incentive scrips or by aligning exchange conversion at the REER rate.
EEPC India reiterated its commitment to working closely with policymakers to safeguard the competitiveness of India’s engineering exporters and ensure sustained growth in the global market.
