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Extension of interest subvention scheme with deeper subvention required to provide export competitiveness : President, FIEO

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NEW DELHI : Interest equalization scheme (IES) is one of the most effective instruments to remove cost disability of Indian exports. The scheme provides much needed competitiveness to our exports, said Shri Ashwani Kumar, President, FIEO particularly to MSMEs as the interest costs in India is much above than in our competitors’ countries. The bank rate in India is 6.5% whereas the bank rate in many of our Asian economies is around 3.5%. With a higher spread, the credit cost in India is generally over 5-6% as compared to such countries, observed FIEO Chief.

CountryBase Rate (April 2024)
South Korea3.50%

Mr Kumar said that the relevance of the Interest Equalisation Scheme is much more today as buyers are asking for longer period of credit, with a slowdown in demand and offtake from the shelves, whereas exporters are also looking for larger credit due to huge hike in Sea and air freight. 

The interest subvention rates may also be enhanced from 3% to 5% for manufacturers MSMEs and from 2% to 3% for 410 tariff lines respectively as when the subvention was reduced, the repo rate was 4.4% which has gone up and currently is 6.5%. This justifies the restoration of the interest subvention to the original level of 5% and 3% respectively so as to provide necessary competitiveness to our exports, said President, FIEO.

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