Merchandise export has been quite volatile like the rupee. After falling for two straight months, it has suddenly jumped over five per cent in April. What could be the possible reason?
The slowdown is basically because of global factors: Recession in the European Union is partly over but not fully, and then there are general global uncertainties. But, India’s exports are still better compared to other emerging countries’. In the last financial year, our exports grew by about 4.1 per cent, while in South Africa it was two per cent, Russia was (-) 1 per cent, Thailand and Malaysia no growth at all, Indonesia was down by (-) 3 per cent, Mexico and Brazil again saw no growth. So, ours was fairly appreciable. And now, the numbers are rising because the recovery is happening in the US and Europe. The GDP of both are expected to increase in 2015.
But what is the main problem exporters are facing besides the usual infrastructure and procedural issues?
I understand the lack of technical productivity is a challenge.
Exporters have to tighten their belts and be globally competitive although this financial year is going to be much better. There is a need for exporters to be supported, although there are incentives available. Trade financing is there. But they have to take advantage of the schemes and these schemes need to be marketed. Right now, the level of awareness of various promotional schemes is not sound, especially in small and medium enterprises (SMEs).
So, are you doing anything to encourage these SMEs to export?
Well, SMEs are not keen to export. The typical Indian SMEs that you see feel that since India is such a large market they can sell all their produce domestically.
So what is the need to export?
In tier II and tier III cities, the awareness is low. So the challenge is to encourage them to export and address their needs. Maybe they don’t want to take any risk. We are, therefore, seeing that new SMEs that are not into exporting should start exporting and that number has to increase.
So, are you floating new schemes for them?
We are trying to identify these SMEs. We are hand-holding them and planning to run a scheme where we will identify some of the top 100 SMEs that are not exporting and help them for the initial six months to a year. We also have a refinance scheme for banks if trade financing is provided in foreign currency. Typically, if some exporter is planning to borrow in foreign currency, we will then refinance that financial institution who is lending. Banks right now are not encouraging their exporters to borrow in foreign currency from them. Of course, volatility is a factor and that is why a lot of exporters are not exposing themselves to foreign currency risks.
But, how will you recover the money if you go into refinancing?
We are raising a lot of foreign currency. Nearly half of our loan portfolio is in foreign currency. This year, we reported 16 per cent growth in our portfolio and our loan book has crossed Rs 75,000 crore and 50 per cent of our asset book is in foreign currency and we are the only financial institution in India whose debts are listed in the emerging bond market index. We did a $ 500-million bond issue and raised it at very competitive rates.
What are your plans for this financial year?
This year, we are focusing on promoting project exports from India. We have already supported over Rs 1.5 lakh crore of project exports in about 74 countries by 99 companies. We have some constraints on our borrowing capacities, which is being looked at. Their documentation is captured by Exim Bank along with ECGC (Export Credit Guarantee Corporation) and the RBI.