NEW DELHI: Exporters of traditional items including textiles, gems & jewellery, handicraft and leather — hit hardest by the slowdown in the Western markets — may get access to cheaper credit to tide over the current global meltdown. The commerce department and the finance ministry are discussing an incentive package for identified labour-intensive export sectors, which could include provision of credit at a subsidised rate and for a longer period. Incentives may also be given to exporters to diversify to alternate markets less affected by the global crisis.

The four-member group headed by the finance secretary and including the secretaries of the commerce department, the department of industrial policy and promotion (Dipp) and the Planning Commission, is expected to soon come out with a set of recommendations for bailing out exporters.

The recommendations will be vetted by Cabinet ministers and the Prime Minister’s Office (PMO), before it is translated into policy measures, government sources said. The group has already met thrice, over the last three working days, to firm up its suggestions. “With exports recording a negative 15% growth in October, there are chances that a package would be decided soon,” a government official said. 

With buyers demanding credit for a longer period, exporters have been clamouring for cheaper credit for a period beyond the present 90 days allowed by banks and a waiver of penal interest.

Giving interest rate subvention (a subsidy on interest charged by banks on loans to exporters) to exporters in some labour incentive sectors is top on the government’s agenda. A subvention of 2% on pre-shipment and post-shipment credit was given to exporters from nine identified sectors last year in July when they were hit by the appreciating rupee. The incentive was withdrawn in September this year. “The government is exploring the possibility of extending similar sops to sectors such as textiles, leather, gems & jewellery, carpets and handicrafts,” another official said.

Exporters have also been complaining about letters of credit not being honoured by banks in the country which is adding to the problems. “We will see if banks can be asked to honour all letters of credit. There is risk involved, but exporters cannot be left in the lurch in their hour of crisis,” the official added.

Incentives could also be given to exporters to explore alternative export destinations in Asia and the Middle East as they have been less affected by the financial crunch. India had set an export target of $200 billion this fiscal which now seems unlikely to be met.

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