India Launches 2 New Components Under Export Promotion Mission

The government has introduced 2 additional components under the Export Promotion Mission, with a combined allocation of ₹7,295 crore.  

The measures are intended to address credit-related issues faced by exporters, especially micro, small and medium enterprises (MSMEs), by lowering borrowing costs and easing access to bank finance. 

Interest Subvention for Credit 

One component involves an interest subvention scheme for pre-shipment and post-shipment rupee export credit. The scheme has a budgetary outlay of ₹5,181 crore and will be in place for 6 years, up to FY31. It will apply to export credit extended by eligible lending institutions. 

Eligible MSME exporters will receive an interest subvention of 2.75%. Exporters supplying to new and emerging markets will receive additional incentives. The total benefit under the scheme will be capped at ₹50 lakh per exporter in a financial year. 

Exports Covered Under Positive List 

The interest subvention will be available only for exports listed under a notified positive list of six-digit HSN tariff lines.  

These tariff lines account for around 75% of India’s total tariff lines. The Commerce Ministry said the list was prepared using data on MSME participation, labour intensity, capital intensity and value addition. 

Restricted and prohibited items, waste, scrap and products already covered under overlapping incentive schemes have been excluded. Defence and SCOMET-notified items have been included to support strategic exports. 

Repo-Linked Interest Framework 

The subvention will be benchmarked against repo rates in India and comparable economies. The rate will be floating in nature and notified by the Reserve Bank of India every three months, with a review scheduled every six months. A sub-committee including the Department of Financial Services will oversee the framework. 

Banks currently extend export credit on a repo-plus basis, with interest spreads decided by individual lenders. MSME exporters typically face borrowing costs in the range of 9.5% to 12.5%, partly due to limited collateral availability. 

Collateral Guarantee Support Introduced 

The 2nd component, with an allocation of ₹2,114 crore, introduces collateral guarantee support for export credit. The scheme will be implemented in partnership with the Credit Guarantee Fund Trust for Micro and Small Enterprises. 

Under this measure, guarantee cover of up to 85% will be provided for micro and small exporters and up to 65% for medium exporters. The maximum guaranteed outstanding exposure will be capped at ₹10 crore per exporter in a financial year. 

Read More: PMAY 2.0 Lending: NHB Urges Housing Finance Companies to Pick Up the Pace! 

Conclusion 

The 2 components focus on reducing credit costs and collateral constraints for MSME exporters, with detailed operational guidelines and a pilot rollout to follow. 

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