Finance Ministry Questions Continuation of Interest Equalisation Scheme Amid Review by Commerce Department

New Delhi, Oct 28 (KNN) In a move that could significantly impact India’s export sector, the Finance Ministry has sought justification for the continuation of the Interest Equalisation Scheme (IES) for exporters, which is currently slated to expire on December 31.

As the clock ticks down, the Commerce Department is actively exploring avenues to revamp the scheme to ensure it aligns with its original objectives established during its inception nine years ago.

Launched in 2015, the IES was designed as an interest subvention initiative aimed at easing financial burdens on exporters, particularly in labour-intensive sectors such as textiles, handicrafts, and leather goods.

Under the scheme, banks provide reduced interest rates on pre- and post-shipment rupee export credits.

The government compensates lenders for the interest subvention, enabling them to extend these reduced rates to exporters. This initiative has been crucial in bolstering India’s export competitiveness in an increasingly globalised market.

However, the Finance Ministry’s recent inquiry reflects a growing concern about the effectiveness of the IES in achieving its goals.

Stakeholders from the export community have voiced apprehensions that the scheme may not have fully addressed the challenges faced by exporters, particularly those from micro, small, and medium enterprises (MSMEs).

These businesses, which form the backbone of India’s economy, often struggle with cash flow and financing, making the IES vital for their survival and growth. As the December deadline approaches, the Commerce Department is weighing various options for revamping the IES.

Officials are considering enhancing the scheme to better serve its intended beneficiaries by focusing on performance metrics and ensuring that the subvention effectively reaches those who need it most.

Additionally, there are discussions about expanding the scheme’s coverage to include a broader range of products and sectors, thereby fostering a more inclusive approach to export promotion.

The urgency of the situation is underscored by the looming expiration of the scheme, which has been instrumental in supporting exporters during challenging times, including the COVID-19 pandemic. With global economic uncertainties persisting, the continuation and potential modification of the IES could play a pivotal role in sustaining India’s export growth.

As the Commerce Department engages with stakeholders to gather insights and recommendations, the outcome of this review could determine the future landscape of India’s export sector, reinforcing the importance of government support in navigating the complexities of international trade. The next few weeks will be critical in shaping the trajectory of the IES and its impact on the country’s economic resilience.

(KNN Bureau)

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