Cabinet decisions on divestment, interest subsidy to push reforms, says India Inc

Sanjeev Sharma

Tribune News Service

New Delhi, November 18

Industry today said the major decisions of the Cabinet on disinvestment, infrastructure boost and sops for exports show that the government is fast-tracking reforms.

Industry body CII said the major decisions of the Cabinet Committee on Economic Affairs (CCEA) to disinvest 10% stake in Coal India and make initial public offering for Cochin Shipyard send out the right signal that the government is fast-tracking reforms.

CII said this would also add to investible public resources. Chandrajit Banerjee, Director-General, CII, said the initiative to extend 3% interest subsidy to exporters would give the much-needed boost to exports which have contracted by 18% in the year so far.

He said the infrastructure sector has been addressed through raising the limit of projects approved by the Ministry of Road Transport and Highways and clearances to as many as 34 road projects apart from clearing Rs 10,000 crore for railway projects.

CII added upstream and downstream sectors would benefit from speedier spending on infrastructure which would also prop up flagging demand in the economy.

“Indian industry hopes that disinvestment, export promotion and infrastructure would continue to receive the highest priority of the government”, the statement said.

In a bid to make exports more competitive and arrest the declining trend, the government today announced 3% interest subsidy scheme for exporters which will have a financial implication of about Rs 2,700 crore.

The CCEA has given its approval for Interest Equalisation Scheme (earlier called Interest Subvention Scheme) on Pre and Post Shipment Rupee Export Credit with effect from 1st April, 2015, for five years”, an official statement said.

The rate of interest equalisation would be 3% which will be evaluated after three years. Financial implication of the proposed scheme is estimated to be in the range of Rs 2,500 crore to Rs 2,700 crore per year, it said.

However, it added the actual implication would depend on the level of exports and the claims filed by the exporters with the banks.

Funds worth Rs 1,625 crore in the non-plan head of account are available under Demand of Grants for 2015-2016 and would be made available to the Reserve Bank, it said.

The scheme would be available to all exports of Micro, Small and Medium Enterprises (MSME) and 416 tariff lines. But it would not be available to merchant exporters.

“We believe that this will give a big boost to exports, particularly for the MSME sector, handicraft, agri-products and food processing,” Power Minister Piyush Goyal said after the Cabinet meeting.

India’s exports remained in the negative territory for the 11th month in a row in October, registering a dip of 17.53% to $21.35 billion due to a demand slowdown, although trade deficit showed some improvement.

Exporters body FIEO said the credit cost has become all the more important as the cycle of exports has elongated due to global contraction in demand and liquidity forcing the exporters to borrow for longer period.