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india | IST

Govt's thrust to exports: Industry experts believe MSME sector will benefit

In a move to boost exports, the union cabinet on Wednesday has cleared an infusion of Rs 4,400 crore in Export Credit Guarantee Corporation (ECGC) over a period of five years. It has also approved capital infusion into the National Export Insurance account.
Union minister Piyush Goyal said, "With the infusion of Rs 4,400 crore towards ECGC, you are allowed 20 times insurance cover, so Rs 88,000 crore insurance cover we can give additional. When you rotate that three or four times in a year, you're looking at Rs 300,000 crore worth of exports that is $40 billion. That is a big thrust when $40 billion, particularly MSME sector exports. 97 percent of our export policyholders are MSME stakeholders when they get this kind of insurance cover, their ability to borrow from the banks improves, their ability to borrow at lower rates of interest increases. Once the MSME sector starts producing more the entire production and its ecosystem has a huge impact all across the country."
"Similarly, we have given Rs 1,650 crore to the National Export Insurance Agency Trust that supports project finance and 20x of that is Rs 33,000 crore, 75 percent of that comes back to Indian industry as Indian production. So effectively, Rs 22,000 to 23,000 crore more of Indian production will get demand in the world markets in the form of project exports. So effectively both are game-changing decisions, which will enable us to provide adequate insurance, correspondingly adequate finance to the exporters," he added.
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To discuss this development in detail, CNBC-TV18 spoke with Amitabh Kumar, joint secretary, The Commerce and Industry Ministry; Sanjay Budhia, co-chairman, The CII National Committee on Exports and Imports, who is also the managing director of Patton Group. Also joining the conversation is Ajay Sahai, director general and CEO, the Federation of Indian Export Organisations and Amiya Chandra of DGFT.
Kumar said ECGC mostly supports small exporters who are in the MSME sector, "So the government has committed to supporting the ECGC by Rs 4,400 crore over a period of five years. A major chunk of it will go towards the small exporters. Credit extended to the exporters by the banks was one of the priority sector lendings for the MSME. So, clearly, it is the MSME sector that will benefit."
"So, around Rs 6 lakh crore of exports are currently supported by ECGC. It is expected that at the end of five years from today, that is by 2025-2026, ECGC will provide additional support to Rs 5 lakh crore," Kumar said.
Sahai said it is a very timely initiative as it has come at a time when there is a growing uncertainty and liquidity problem in the global trade, "Therefore any infusion of liquidity will help the sector. The government is infusing around Rs 4,400 crore and this will provide insurance cover to around Rs 88,000 crore. Since the ECGC is currently covering 28 percent of exports, we feel that it should be more aggressive and they should cover at least 50 percent of exports by 2025."
"The good thing is that the government is bringing the initial public offer (IPO) also for the ECGC, which could help it raise some money from the market and increase the coverage. It is a very important move and has come at a time when liquidity is a challenge for the export sector and growing uncertainty and defaults - both will get addressed through this kind of initiative," he added.
For the entire discussion, watch video