NEW DELHI: A majority of exporters have identified high interest rates as a key stumbling block with three-fourths saying they borrow at over 12 per cent , and that too, after giving collaterals.
In a survey conducted by the Federation of Indian Export Organisations and shared with TOI, 40 per cent said they expected exports to decline during the current financial year, while 22 per cent see a growth of up to 5 per cent .India’s exports have remained wobbly amid a choppy global environment, growing 1 per cent to $213 billion during first half of the current fiscal year. Most exporters identified the US and UAE as markets with good growth.
Of the 678 exporters, 39 per cent have identified high interest rates as the top concern, followed by freight rates that have soared due to tension in Persian Gulf and availability of shipping lines (see chart). While govt has stepped in to resolve freight related concerns, there is no respite from high borrowing cost. 22 per cent of exporters have borrowed at 10-12 per cent .
With RBI’s repo rate at 6.5 per cent , the benchmark for fixing lending rates is high when compared with other countries in the region, including China (3.1 per cent ), Vietnam (4.5 per cent ), Malaysia (3 per cent ) and Thailand (2.25 per cent ). And, lenders are keeping a spread of almost 6 per cent when lending to exporters, a problem that has been repeatedly highlighted but neither the finance ministry nor RBI have done anything to resolve it. For weeks, the expenditure department has been sitting on a proposal to extend the interest subsidy. What accentuates the problem, especially for small exporters, is the need for collaterals, with 82 per cent saying they had to provide security to get loans. The commerce department is examining how credit flow can be eased and ECGC and guarantees could be used to make it easier for exporters to borrow, and at lower cost.
In the survey, 82 per cent said they have been adversely impacted by freight rates, with 86 per cent saying logistics impacted competitiveness. Ocean freight was identified as the top concern on this front.