The Commerce Ministry has decided to take up with the RBI, the Finance Ministry and banks, the problems faced by exporters due to a sharp drop in export credit despite an increase in exports.
“Commerce Minister Suresh Prabhu will hold meetings with the Department of Financial Services in the Finance Ministry, the RBI and leading bankers to discuss ways to increase credit flow to exporters,” a government official told.
In July 2018 (up to the 20th), export credit provided by banks fell about 47 per cent to 21,900 crore compared to the same month last year. Overall lending to the priority sector, however, increased 7.5 per cent during the month, as per the latest RBI data. Even compared to March this year, there has been a 22.7 per cent drop in export credit.
“The flow of credit to the export sector is at an all-time low. When export growth is over 15 per cent, there is no reason that export credit is down by 25 per cent or more. This is going to affect all exporters,” said Ajay Sahai of the Federation of Indian Export Organisations (FIEO).
It is the MSME sector that is hit the most by the credit crunch as, without liquidity, they are unable to take orders.
With the refund of input tax credit continuing to be a stiff challenge, especially at the State level, it is a double whammy for exporters.
Exports from sectors dominated by MSME units — such as plantations, marine products, readymade garments, jute manufacturing including floor covering — continue to post a decline despite an overall growth in exports.
“The government has to realise that you cannot talk about pushing up exports while not addressing the liquidity problems of exporters,” said a Delhi-based exporter of garments. “Banks have to be convinced to loosen their purse strings for exporters. If that doesn’t happen export growth will be erratic and labour-intensive sectors will continue to suffer.”