Exporters Body Seeks Urgent Steps On Liquidity Front Amid Strained Exports

FIEO demanded immediate restoration of the scheme with a cap of Rs 10 crore for all MSMEs for five years.

PTI

India's merchandise trade deficit expanded in August as the rise in imports was accompanied by a fall in exports.

(Photo by Kurt Cotoaga on Unsplash)

Expressing concerns over the decline in exports, exporters body Federation of Indian Export Organisations on Monday urged the government to immediately take steps on the liquidity front and announce a higher rate of interest subvention support to improve shipments.

The imposition of Rs 50 lakh per company cap in the interest equalisation scheme has hit many MSMEs, and they are unable to decide on order with non-availability of further subvention, FIEO President Ashwani Kumar said.

He demanded immediate restoration of the scheme with a cap of Rs 10 crore for all MSMEs for five years.

Besides, the government should also extend the RoDTEP (Remission of Duties and Taxes on Exported Products) benefits to all sectors of exports, he added.

Kumar said that such a dip in exports is mainly on the back of continuing global economic uncertainties.

The ongoing international trade disruptions, along with the volatility in crude and metal prices, have also played a key role in the declining value of exports to some extent, he noted.

The rising tensions between Israel-Iran have continuously led to logistical challenges with regard to international trade getting impacted as most of India's trade to Europe, Africa, CIS, and the Gulf region is happening through the Red Sea route or the Gulf region, prompting buyers to have little large inventories, Kumar added.

Also Read: UK-India Business Boosted By Prospect Of Trade Deal, HSBC Says

"The challenges with regard to trade finance still remain the key for the MSMEs, as it is really impacting the competitiveness of Indian products in the global markets," he said.

After recording a double-digit growth in October, India's exports in November contracted by 4.85% year-on-year to $32.11 billion, while the trade deficit widened to an all-time high of $37.84 billion due to a record surge in gold imports.

Aditi Nayar, Chief Economist ICRA Ltd, said such high levels of gold imports were likely driven by festive and marriage-related demand and are unlikely to sustain in the ensuing months, which would help to cool the upcoming merchandise trade deficit prints.

"The adverse trade deficit print for November 2024 will result in a sharper-than-expected widening in India's current account deficit in Q3 FY2025, to about 2.8% of GDP as against earlier expectations of about 2%, which will be the highest level in over two years,' she said.

Think tank Global Trade Research Initiative said that service export values were higher than merchandise exports in November and this should not surprise anyone. Higher services growth has been a consistent trend and is now resulting in higher export values.

"Between fiscal 2019 and 2024, India's merchandise exports grew at a compound annual growth rate (CAGR) of 5.8%, while services exports surged ahead at a robust CAGR of 10.5%," GTRI founder Ajay Srivastava said.

At this rate, he said, by fiscal 2030, services exports are expected to reach $618.21 billion, edging past merchandise exports, which are projected at $613.04 billion.

"Other Business Services will be the new star replacing IT from the top services exports position by 2030. The government needs to work out a core policy for realising the growth potential of this sector," he added.

Also Read: India Should Not Be Overly Concerned About Imports As Long As Exports' Share Grows: Commerce Secretary

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