The exports data for the second month of the fiscal though have shown a robust growth but MSME units particularly in labour-intensive sectors such as textile are either showing very modest growth or are into negative territory. These sectors are still facing the liquidity crunch as banks and lending agencies have continuously been tightening their lending norms, as reflected in sharp reduction in exports credit, which does not augur well for their exports.
The increase in Repo Rate from 6 per cent to 6.25 per cent by RBI at this juncture will increase the cost of credit to exporting units and will have a detrimental effect on exports since garment exporters have been already reeling under pressure due to various factors and unforeseen ramifications after implementation of GST.
Since October last year, exports of ready-made garments have significantly declined. It was found that the introduction of GST had “unintended consequence” of reducing tax refunds by 5-7 per cent as compared to the pre- GST period, making Indian apparel uncompetitive in the international market. More than `5,700 cr of refunds are stuck due to procedural issues after implementation of GST, contributing to cost escalation and slowdown in exports. The interest rate in the international market is between 2 per cent to 4 per cent, in our country, the interest rate is in the region of 11 per cent and to compensate that only, Government has announced Interest Equalization Scheme and providing 3 per cent Interest Subvention the packing credit and exporters have appealed to increase the Interest Equalization scheme rate from 3 per cent to 5 per cent immediately.
At last, our Finance Minister announced setting up of a fortnight-long special refund drive by the Central Board of Indirect Taxes and Customs to resolve the Input Tax Credit- (ITC-) and integrated GST- related refunds. The government is also looking at giving exporters input credit for certain embedded State and Central levies for which no such provision is available at present.
The issues including access to credit, cost of credit especially for MSMEs should be seriously looked into as global challenges and increasing protectionism, has also added to the woes of the exporters. India also need to sign as quickly as possible free trade agreements with the European Union (EU), the United States and the United Kingdom, a comprehensive economic partnership agreement (CEPA) with Australia and a comprehensive economic cooperation agreement (CECA) with Canada to have a level playing field in the global market.