India’s exports had contracted in 20 of the 21 months till August this year except in June 2016, when it expanded 1.27 per cent.
Mukherjee said the Centre will have to consider strengthening India’s institutional credit guarantee framework in the trade sector to put the country back on a high export growth path. The framework includes the state-owned ECGC (formerly Export Credit Guarantee Corporation of India) that promotes the country’s exports by improving the competitiveness of the Indian exporters through credit risk insurance covers and related services.
“Export credit insurance and guarantees in the spectrum of trade financing are of critical importance in today’s scenario of continuing high systemic risk,” he said while speaking at the ECGC’s diamond jubilee celebrations.
The Parliamentary Standing Committee on Commerce had recently recommended that “for ECGC to play a greater role in export promotion, support in maximum liability and capital needed to be extended by the government.” Stating that “a robust, vibrant and well-functioning ECGC can be an enabler for putting the country back on a high export growth path,” Mukherjee said he was confident that the Government will examine the Parliamentary panel’s recommendations.
A weak global demand has adversely impacted India’s exports and reviving exports in a scenario of sluggish demand worldwide will remain a serious challenge for India. “We must overcome by improving the competitiveness of the domestic industry through better infrastructure and regulation,” he said.
Several developed countries have consciously introduced special concessions and stimulus packages to manage the present downturn, he said. India also needs to support its SME exporters as they have the potential for accelerated growth but at the same time, it is considered a high-risk venture by commercial lenders. The ECGC needs to respond appropriately in the light of the overall macro situation and the business practices followed by its counterparts in other countries.
The ECGC has been insuring banks whose share is almost 70 per cent of the export credit disbursed in the country, the President said adding that the cover offered by the ECGC at various stages of lending bring a certain degree of comfort for banks in today’s uncertain times. Banks under ECGC cover also enjoy substantial relief in the capital allocation for their export credit outstandings, he said.
Mukherjee said geopolitical instability, economic downturn, war and terrorism have further hampered the growth of world trade.
The world trade is now dependent on larger emerging economies including China and India as the developed world has been facing a crisis such as that of 2008 and Eurozone crisis. Besides, the developed economies are also currently dealing with commercial and economic risks, the reality of Brexit, and an influx of refugees.
Despite these global headwinds, India’s economy is performing well, he said, adding that a normal monsoon this year is expected to provide a fillip to this year’s growth, unlike the last two years when below normal rains created an agrarian crisis and caused much rural distress, he said.
Source: The Hindu