The exporters that are receiving interest rate subsidy from select sectors are likely to see the subvention extended beyond the earlier set date of March 31st, 2009.
The government has extended the 2% interest rate subsidy for another nine months up to December 31st, 2009. This move has been taken by the UPA government in an attempt to boost the economy.
This interest rate subvention was allowed by the Reserve Bank of India (RBI) to seven export sectors from December 2008 to March 31st, 2009. The seven export sectors include textiles, handicrafts, leather, marine products, gems & jewellery, carpets and small & medium enterprises. These exporters are extended credit from banks at 2% lower interest rate against the card rate set for exporters. Further this 2% is reimbursed to the banks by the government.
However this facility is only available if the interest rates do not fall below 7%. It is basically the rate at which credit is extended to the agriculture sector under priority sector lending.
During the past few months, exports have been declining following which the government has decided to continue the subvention. Moreover the exporters' body Fieo has also asked to provide the subsidy to some more sectors such as tea, basic chemicals, engineering goods, jute, plastics and linoleum.
Further the gems & jewellery sector that has experienced a fall in its demand from the overseas market has asked to raise the subvention rate from 2% to 4%.
An official connected with the commerce sector said, "While an extension of the interest subsidy available to exporters till March 31 this year is definitely on the cards, it could prove to be a little difficult to push the other demands through. However, we are trying to get as much as possible for the export sector."
In fact the country's exports are expected to remain depressing even in the coming fiscal because of the recession becoming aggressive in the Western economies.