Exim Bank On Overdrive To Boost Exports

A worried UPA 2 government is now providing thrust to emerging sectors such as creative industries and innovative handicrafts to further boost India’s exports. The main aim is to tackle the problem of growing trade deficit being faced by the country.

Latest data indicates that India’s exports, for the first time since 2009 fell by 5.7 per cent to $28.7 billion in March as compared to the same month last year, while India’s imports rose by 24.3 per cent to $42.6 billion in March 2012 as compared to March 2011.

The trade deficit for this single month was at $13.9 billion as India’s oil imports rose by 32.5 per cent to $ 15.8 billion in March 2012.

Though India has crossed the $300 billion export target for the year 2011-12 by registering exports of $303.7 billion, its trade balance is still negative at $184.9 billion, a level which has raised concern both in the government and by international rating agencies.

Following a surge in India’s oil and gold import bills, India’s imports in the last financial year were to the tune of $488.6 billion compared to exports of $303.7 billion causing a trade deficit of $184.9 billion.

The government is working to arrest the imports bill as well as to enhance exports to bridge the balance payment gap.

The government promoted Export Import Bank of India (Exim Bank) has been mandated to finance export-oriented creative industries as well as entrepreneurs who are keen on promoting rural art, craft and traditional products that have export potential.

Exim Bank, which is a development bank, would soon be launching a new programme to finance export-oriented creative industries. Exim Bank will also work with commercial banks and financial institutions to facilitate more credit to export-oriented units.

The thrust areas include modern segments like animation, gaming software, content development for movies, media, education where India has competitive advantage. Segments of traditional skills such as carpets, decorative items, wickerware, glassware, handmade lace, needlework rugs and embroidery would also get a leg up.

Currently, India is the eighth largest exporter of creative goods and the growth rate in 2010 was the highest among top 10 exporters. However, India’s share in exports of creative goods was $13.8 billion as compared to China’s exports of $ 97.8 billion.

Exim Bank is now determined to address this imbalance. Apart from this, the bank is providing Buyer’s Credit to overseas sovereign governments and government-owned entities for import of goods and services from India on deferred credit terms, without recourse to the Indian exporter. Last year four projects worth $405.08 million (Rs 2,135 crore) were approved, the first being a water treatment plant in Sri Lanka.

Exim Bank is planning to set up a dedicated fund “TIEID Fund” (Technology & Innovation Enhancement and Infrastructure Development) with an initial amount of $500 million (over Rs 2500 crore) in the coming five years to assist Micro, Small and Medium Enterprises (MSMEs) with long-term foreign currency loans.

As per the MSME Census 2010, only 12.2 per cent of the registered MSME units had availed foreign currency loans due to funding constraints of Tier II banks.

Exim Bank said that it would work in collaboration with other commercial banks and financial institutions to reach out to a large number of MSMEs to build capacities in the area of skill development, design, packaging, market development for specific MSME clusters.

To boost exports from rural grassroots levels, Exim Bank is providing financial support for setting-up of common infrastructure facility for Indian systems of medicine. It is also supporting artisans’ and farmers’ cooperative societies to produce naturally dyed silk and wool textiles.

NGOs are being supported to upgrade and modernise existing unit to produce various types of handicrafts including bamboo and natural fibre-based products. All these initiatives are expected to help India boost its exports revenue.

Exim Bank chairman & managing director TCA Ranganathan said that India was currently witnessing rapid growth in the exports of transport vehicles, plants and machinery, engineering goods and consumer goods. Some Indian brands are also thriving exports markets of Africa, he said.

While exports to traditional bastions such the US and Europe have sharply declined due to economic recession in those countries and resultant decrease in buying power by their citizens, Indian exporters have quietly shifted focus to emerging markets in Asia, South Africa and Latin America where Indian goods and services are in demand. Exports to these regions in fact helped India cross the target last year.

Currently, Europe and the US account for only 40 per cent of India’s exports compared to 60 per cent five to seven years ago. India is fast growing the new markets of Asia, South Africa and South America and this trend is expected to continue.

Now the UAE is India’s largest exports market with trade volume of $24 billion which is 8 per cent of all India’s exports. Despite high inflation numbers and concern on India’s balance of payment situation, India is rising in the pecking order among world’s top exporting countries. India which was on the 21st position in 2009 has become 19th largest exporting nation in 2011 and is poised to come up in the ladder.

India’s oil imports surged by 47 per cent to $ 155.6 billion in 2011-12 while non-oil imports grew by 26.2 per cent to $333 billion and import of gold contributed substantially to this. Rising oil imports being the main culprit, India’s high trade deficit could worsen its current account balance and further weaken the rupee which has already slumped by about 16 per cent in the past year against the US dollar.

How will the government address the current concerns is something Finance Minister Pranab Mukherjee will have to answer.

By Jully Acharya from Mumbai