Credit sops small breather for cash-starved exporters

ECONOMIC STIMULUS: The extension of the interest subsidy scheme to cost the exchequer Rs 500 crore.

Extension of interest subsidy scheme by another six months for loans taken by exporters in labour-intensive sectors was the only fiscal stimulus measure announced in the Interim Budget for 2009-10.(See table)

The scheme, which gives a 2 percentage point interest rate subvention on export-related loans, was to expire in March 31, 2009. The announcement only partially meets the demand from exporters who wanted the scheme to be extended till December 2009.

“To counter the negative impact on exports due to the global financial crisis, I propose to extend the interest subvention of 2 per cent on pre- and post-shipment credit for certain employment-oriented sectors, that is, textiles (including handloom & handicrafts), carpets, leather, gems and jewellery, marine products and small and medium enterprises beyond March 31, 2009, till September 30, 2009,” said Mukherjee.

He also stressed the need for further fiscal measures to revive domestic demand and support certain sectors that are adversely affected by the global economic crisis. This, he said, the newly elected government should undertake. The extension will cost the exchequer Rs 500 crore in 2009-10. Exporters were expecting some more fiscal moves in the Interim Budget.

Mukherjee assured that the government would continue to support public sector banks, at a time when sources of liquidity are drying up. “The government would recapitalise public sector banks over the next two years to enable them to maintain a capital to risk-weighted assets ratio of 12 per cent and to ensure that credit growth continues to sustain economic growth,” he added.

Later, finance ministry officials said at a press conference that the government would provide Rs 1,900 crore to recapitalise state-owned banks in the current fiscal. An additional $3 billion (around Rs 14,400 crore) is expected to be given to 17 to 18 public sector banks over the next two years.

However, exporters remained unhappy with the Interim Budget. “The extension will help us only till the period it is valid, while the global economic downturn may continue beyond that,” said A Sakthivel, chairman of the Federation of Indian Export Organisations.