MSME Exporters Alert: There may be a big good news for MSME exporters. The government is considering restarting the interest equalization scheme for them. The scheme was discontinued in December 2024, but it may be restarted given the imposition of import duty by the US and uncertainty in the global economy. This will enable exporters to get cheap loans (MSME export loans), which will give new impetus to their business. So, if you are also an MSME exporter, then this news can bring a new ray of hope for you.
Cheap loans are no less than a lifesaver in the era of inflation
Currently, exporters get loans from banks at 8 to 12 percent interest. Interest rates for MSMEs are sometimes even higher than this. Indian MSMEs have to compete fiercely with China, where entrepreneurs get loans at 2 to 3 percent interest. In such a situation, this expensive loan is a big challenge for Indian exporters.
Why is a subsidy on a loan necessary
India has recently signed a free trade agreement (FTA) with England. Negotiations are also going on for a bilateral trade agreement with the US! Exporters say that incentives are necessary to take advantage of these opportunities. Getting cheap loans will make them more competitive in the international market and get new orders.
Exporters have demanded that the government to extend this scheme several times. When the extension of the scheme was not mentioned in the last budget, exporter organizations had separately requested Finance Minister Nirmala Sitharaman for this. Earlier, Ashwini Kumar, the then president of the exporter organization FIEO, had said that further extension of the scheme should be considered positively. The interest rate in China is 2-3 percent, and this helps their exporters a lot.
He had also demanded to increase the credit limit in this scheme from ₹ 50 lakh to ₹ 10 crore. He said that many MSMEs have been affected by imposing a limit of ₹ 50 lakh per company. Due to non-availability of subsidy, they are not able to decide on new orders.
How exporters used to benefit
The Interest Equalization Scheme for exporters was launched in 2015! For the first time, its duration was five years i.e. till 31 March 2020! After that it was extended several times. Last time in September 2023, it was extended till December 2024.
Under this scheme (Export Promotion Policy), about 8 out of 10 beneficiaries were MSMEs. In this scheme, MSME exporters used to get a 3% interest subsidy. Exporters used to get a subsidy on export credit in rupees before shipment and after shipment. The Directorate General of Foreign Trade (DGFT) and RBI were responsible for monitoring it. This scheme was a big support for MSME exporters, helping them to survive in the international market.
What is the credit gap of MSMEs
The Small Industries Development Bank of India (SIDBI) said in a recent survey report that the sector is getting 24% fewer loans than required. This credit gap (MSME credit gap) is around ₹30 lakh crore. In the SIDBI survey, the highest 22% said that getting a loan is the biggest challenge.
According to the Annual Survey of Unorganized Sector Enterprises for the year 2023-24, there are 7.34 crore MSMEs in the country. Of the enterprises with enterprise registration, 98.64% are micro, 1.24% small, and 0.12% medium. About 26 crore people work in them! This sector is an important pillar for the Indian economy.
Contribution of MSMEs to the economy
According to SIDBI, the share of MSMEs in the country’s Gross Value Added (GVA) was 27.3% in 2020-21. This increased to 29.6% in 2021-22 and 30.1% in 2022-23. MSME exports have also increased significantly during this period. Their exports increased from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25.