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Commerce Ministry wants exports included in priority lending

A communication regarding the issue has been sent to the Finance Ministry

Press Trust of India  |  New Delhi 

The Commerce Ministry has asked the Finance Ministry to include export credit in priority sector lending of all banks to boost overseas sales.

"We have taken up this matter with the Finance Ministry. It will help exporters in getting easy and affordable credit from banks," Director General of Foreign Trade Anup Pujari told PTI.

At a Board of Trade meeting on August 27, export promotion councils and industry leaders demanded the inclusion of export credit in priority sector lending, Pujari said.

"Exporters have told us that total credit from banks to the export sector is falling and needs to increased in order to give support to the sector," he added.

A communication regarding the issue has been sent to the Finance Ministry.

The flow of credit to the export sector is declining and is a cause of concern, said Ajay Sahai, Director General of the Federation of Indian Export Organisations.

"Between 2007-08 and 2012-13, the share of export credit in total credit has come down from 19.82% to 11.36%. A sharp decline of 8% substantiates the claim of the export sector, which suffers from a liquidity problem," he said.

At present, only foreign banks are required to disburse 12% of their credit under the priority sector to export companies. For other banks, export finance is outside the 40% priority sector mandate.

Although the country's merchandise exports grew 11.6% in July, overseas shipments from major sectors such as engineering and textiles are still in the negative zone.

Engineering goods, gems and jewellery, textiles and petroleum products account for almost 80% of the country's exports.

Slowing growth in exports and increasing imports are putting pressure on the current account deficit. The deficit, which indicates the excess of imports of goods, services and transfers over exports, touched 4.8% of GDP (or $88.2 billion) in 2012-13.

In the current fiscal, the government has targeted a current account deficit of 3.7% of GDP (or $70 billion).

First Published: Thu, August 29 2013. 15:13 IST