The six-member inter-ministerial committee headed by Finance Secretary RS Gujral was constituted by the Cabinet Secretary to suggest short and medium term measures to enhance exports from the Micro, Small and Medium Enterprise sector. (Agencies)
"The cost of export credit for MSMEs varies from 11-14 percent. This is on the higher side compared to international standards. There is a need to lower the interest rate for MSME exporters... The Committee recommends that an additional 2 per cent interest subvention may be provided to exporters who repay on a timely basis," the report said.
The government, meanwhile, has hiked the interest subsidy to 3 percent from 2 percent - still a percentage point lower than the panel's suggestion - to encourage exports.
The CAD - the difference between inflow and outgo of foreign currency - touched a historic high of 4.8 percent of GDP in 2012-13, mainly on account of increasing imports and declining exports.
The Committee has, however, suggested that the incentives should be limited for a period of five years in view of the need to curtail fiscal deficit.
It has recommended that export credit limit to MSME units may be increased by 20 percent automatically and an alternatively credit limits could be set in US dollars wherever possible.
It said that banks should aim at earmarking 40 percent of export credit by banks for MSMEs and the buyer’s credit limit under automatic route should be increased from USD 20 million to USD 50 million.
The committee has also asked for relaxation of RBI’s external commercial borrowings norms, to allow all categories of MSME engineering exporters to raise ECBs for import of capital goods and equipment.
The six-member inter-ministerial committee headed by Finance Secretary RS Gujral was constituted by the Cabinet Secretary to suggest short and medium term measures to enhance exports from the Micro, Small and Medium Enterprise sector.