Increase in rate of interest subvention to 3 percent as against 2 percent earlier will bring down borrowing costs of exporters, Federation of Indian Export Organisations (FIEO) said Wednesday.
"It will help in reducing the cost of credit and adding to competitiveness of exports," said FIEO president M. Rafeeque Ahmed in a press statement released on its website.
The government Wednesday announced an interest subsidy increase for exporters from the existing two percent to three percent. The new rate would be applicable from Aug 1.
This will benefit the exporters of small and medium enterprises and also the most of the labour intensive sectors. Their cost will come down appropriately by increase in the rate of interest subvention.
Ahmed appreciated the move to extend interest subvention to few left over sectors and hoped that it will cover sectors not performing well as well as sunrise sectors of exports.
However, the FIEO chief proposed for immediate implementation of Padmanabhan Committee recommendations for bringing exports under priority sector.
He also stressed on importance of setting up a special fund for export development. "Additional plan allocation for MAI/MDA will help in export marketing but I still believe that we should form an Export Development Fund with sizable corpus for aggressive marketing," he added.
In addition, Ahmed also raised concern about delays face by exporters while applying for the benefits. "Delays in grant of exports benefits has affected the liquidity of exporters and announcement to settle all pending claim forthwith will help the export sector to tide over liquidity problem to some extent," he said.
The FIEO chief expressed optimism that India will be able to achieve the export target of US$ 325 billion set for 2013-14 as global situation is improving and Rupee depreciation has provided competitiveness which needs to be en-cashed.
Dr A Sakthivel, Chairman, AEPC has also welcomed the increase in rate of interest subvention from 2 percent to 3 percent.
In his statement he thanked Union Finance Minister P Chidambaram and Union Commerce Minister Anand Sharma.
He said, "The move will help all SME exporters as the availability of capital at low interest is critical component. The Government is concerned due falling exports, the volatility in rupee against dollar therefore; this intervention was the need of time. It will also help in addressing the growing current account deficit."
"This measure will surely improve the liquidity condition and help in the boosting the apparel exports from India," added Sakthivel.