Incentives for export-oriented SMEs | SupportBiz

Policy Notes

Incentives for export-oriented SMEs

The Union Cabinet Minister for Commerce, Industries and Textiles, Government of India, Anand Sharma recently announced the extension of its two percent interest subvention scheme on rupee export credit up to March 31, 2014. The scheme benefits SMEs across sectors.

Earlier, the interest subvention scheme was scheduled to end on March 31, 2013. Along with this extension, the coverage of this scheme has also been extended. Where only firms in specific sectors could benefit from this scheme earlier, SMEs representing any industrial sector can avail of it now. 

Considering the tough economic conditions the world over, the government of India has made boosting of exports a priority in its strategies. This extension has been introduced as a part of the same. Indian exporters are currently undergoing a tough phase, having faced some serious challenges throughout 2012, including demand slowdown in key markets such as Europe and the US.  

Giving an insider’s viewpoint on this scheme, A Sakthivel, Chairman, AEPC, said, "This is a timely move, which will help exporters. The apparel and textiles sector in India was struggling badly due to tough market conditions in the US and Europe. As per an estimation, almost 75 percent of garment exporters from India would be benefited from this scheme.”

Didar Singh, Secretary-General, FICCI, said, "We not only welcome the extension of the interest subvention scheme, but we can also foresee its strong positive impact on SMEs."

Sanjay Budhia, Chairman, CII National Committee on Exports and Imports, and CMD, Patton Group, welcomed this announcement and stated that it will bring great relief to exporters. He stated that extending interest subvention to certain specific sub-sectors of the engineering sector till 31st March 2014 will also help exporters who have been affected by declining exports to the US and EU.

Budhia stated, “The South Asia region is fast becoming the world’s economic centre of gravity, and though India's trade with South Asian countries has increased encouragingly, from USD7 billion in 2005-06 to USD15 billion in 2011-12, trade potential is below the existing potential. The contemporary challenges faced by Indian exporters can be addressed by this scheme.” 

Budhia also spoke of another development: that of five new countries being added under the Special Focus Market Scheme. This coverage of this scheme has also been enhanced, by introducing sixty new products including engineering products, rubber, textiles, drugs and pharmaceuticals.

He stated that three new countries (Taiwan, Thailand and Czech Republic) have also been added under the Market-linked Focus Product Scheme.

While the Indian government and policy makers seem to be making sincere efforts for industry reforms, specially focusing on the SMEs, the impact of these efforts is yet to be measured.