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2013-08-20

Govt plans more incentives to boost MSME exports, arrest decline in rupee

The government is contemplating additional incentives for the MSME sector with a view to boost exports and to help arrest the decline in value of rupee, which has breached Rs 63 to a dollar mark on Monday.

The government is contemplating additional incentives for the MSME sector with a view to boost exports and to help arrest the decline in value of rupee, which has breached Rs 63 to a dollar mark on Monday.

The six-member inter-ministerial committee headed by Finance Secretary R S Gujral has already submitted its report. The committee was constituted by the Cabinet Secretary to suggest short and medium term measures to enhance exports from the MSME sector.

“We should create an Export Development Fund so as to support them on this front. The corpus of the fund should be 0.5 percent to 1 percent of export value so that sizable money is available to promote MSME exports,” the panel had recommended.

The report had suggested fiscal and non-fiscal incentives including enhanced interest subsidy of 4 percent from the existing 3 percent, to boost exports from MSME sector.

With rupee touching a record low of 63.30 to dollar, the government is looking at ways to increase inflow of foreign exchange into the country and is taking measures to boost export.

The CAD - the difference between inflow and outgo of foreign currency - touched a historic high of 4.8 percent of GDP in 2012-13, mainly on account of increasing imports and declining exports.

The Committee has, however, suggested that the incentives should be limited for a period of five years in view of the need to curtail fiscal deficit.

It has recommended that export credit limit to MSME units may be increased by 20 percent automatically and alternatively credit limits could be set in US dollars wherever possible.

It said that banks should aim at earmarking 40 percent of export credit for MSMEs and the buyer's credit limit under automatic route should be increased from $20 million to $50 million.

The committee has also suggested relaxation of RBI's external commercial borrowings norms, to allow all categories of MSME engineering exporters to raise ECBs for import of capital goods and equipment.

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