India flags export credit shortfall, weak factoring services as export hurdles

India has identified low export credit availability and underdeveloped factoring services as major pain points for export growth. Addressing NITI Aayog’s post-budget webinar on Trade Finance, Director General of Foreign Trade (DGFT) Santosh Kumar Sarangi revealed that export credit stood at $124.7 billion, covering just 28.5% of the required $284 billion for merchandise exports worth $437 billion in FY 2023-24.

Looking ahead, India aims for $1 trillion in merchandise exports by 2030, which would push total export credit demand to $650 billion. However, if financing remains at current levels, the trade credit gap is projected to surge to $525 billion.

Export credit insurance & factoring services lagging

Sarangi noted that the Export Credit Guarantee Corporation of India (ECGC) provides insurance cover for just $44.9 billion of the total $124.7 billion in export credit. Additional concerns include collateral demands, high interest rates, and the lack of an integrated trade finance framework or duty remission scheme for services exports.

Factoring services—where suppliers sell invoices at a discount to lenders for short-term liquidity—remain vastly underdeveloped in India. While global cross-border factoring services are estimated at $758 billion, India’s share is just $1 billion.

Challenges faced by e-commerce exporters

The DGFT also flagged multiple hurdles for e-commerce exporters, including payment reconciliation issues in the Export Data Processing and Monitoring System (EDPMS), high bank fees, non-availability of credit, lack of duty and tax reimbursements, and insufficient capacity-building support for new exporters and entrepreneurs.

(Edited by : Sheersh Kapoor)

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