With $18 billion line of credit extended to 65 countries, India’s Exim Bank is eyeing a bigger role in the global financial architecture. Further, with the closing down of the US Exim Bank, Yaduvendra Mathur , chairman and managing director of Export-Import Bank of India feels that it opens up more market for the bank. Talking to Sohini Das , Mathur outlines how Exim Bank is encouraging companies to set up manufacturing facilities in countries like Cambodia, Laos, Vietnam and Myanmar. Excerpts:
Exports have been contracting for the past six months. What strategy has Exim Bank adopted to counter the problem?
We are not directly managing the exports and imports; we are only into project exports. We have not noted any slippage in project exports; they continue to grow. Overall exports may have reduced, and my sense is that it might be because of the pricing of petroleum. I think the slippage in the figures is not indicative of any slippage in the economy. There is a global slippage in demand, but India’s slippage is much lower in comparison to the other developing economies. Other economies have slipped by five or six per cent, while our slippage is by two to three per cent.
You recently extended the line of credit to Tanzania. Now with Prime Minister Modi visiting many countries across the globe, what is the plan on the line of credit?
We are going to Bangladesh soon to extend a $2 billion dollar line of credit. Currently, we have $18 billion line of credit extended to 65 countries. The prime minister has announced it, and now the final signatures would be done in the first or second week of August. It is for Bangladesh to decide what it wants to import with this money, but 75 per cent of the money has to be plumbed into imports from India. The loan we give comes with a rider.
Will closing down of Exim Bank in the US have any repercussions on operations of Exim Bank in India? Will it make it tough for Indian companies to expand in US markets?
Exim Bank in the US has closed down because there are groups in the US which think that the support that US Exim Bank is giving to some companies, is crony capitalism. But we think that the role of ECAs (export credit agencies) in countries like India and in Asia is immense. In fact, seeing our pattern, many other countries are opening up exim banks. With the US Exim Bank closing down, we would now have more market. Now that competition will go away. Indian companies are going to the US, and we are encouraging them to set up units and factories in the global value chain, so that they can access more developed markets.
Instead of exporting raw materials, we want them to upgrade first in India, and then prepare the final finished good in another country, if they can take advantage of the regional trade treaties that exist, like the Trans-Pacific partnership. One initiative that Exim Bank is supporting is Cambodia, Laos, Vietnam and Myanmar, where we are encouraging Indian companies to go and set up their factories there. From there, they can export to the US and Europe markets.
You recently signed a multilateral agreement with New Development Bank (NDB) along with other development banks of BRICS nations. Will it help India diversify more to these nations, as it faces subdued demand conditions from the advanced world?
We are very enthused with the BRICS and the new initiative, including the New Development Bank. This is a major development in the international financial architecture. With leadership being provided by India through its president K V Kamath — the way he had transformed retail banking in India — we look at the same transformation in the global financial architecture.
Exim Bank, in collaboration with AfDB, is setting up a project development company in Africa to identify and develop infrastructure projects there. How do you envisage India’s private sector role in building infrastructure in Africa? It had burnt it fingers in the PPP model in India. Do you see similar problems in Africa?
We have set up a project development company that would be registered on July 20. The shareholders’ agreement would be signed in Mauritius. It is called the Kukuza Project Development Company (KPDC). The equity holders are Exim Bank, African Development Bank (AfDB), State Bank and ILFS. KPDC would do early stage project development. It would spend money on a PPP model, then bid out and recover its costs. The PPP model is being questioned because tariffs are not clear and there should be more flexibility in the mid-term.
Which level of rupee against the dollar you see an ideal for making Indian exports competitive?
The target by the Reserve Bank of India (RBI) is around Rs 63-64 against the dollar. I don’t think that a genuine exporter actually plays on the currency game; he plays on the quality of the products. More quality and more complex products should be made. We should go up the value chain.