Commerce Minister Suresh Prabhu on Tuesday said he has taken up the issue of the credit crunch facing exporters with the Finance Ministry along with the request to ensure adequate availability of funds to them.Data from various sources indicate a decline in export credit growth in recent months. According to one estimate, outstanding export credit on March 31 this year stood at Rs 28,300 crore, which came down to Rs 22,300 crore as on June 22. "One of the main challenges for export is finance. There is a decline in export finance, so we have taken up the issue with the Finance Ministry. I think, the Finance Minister is also looking into how we can improve the credit flow into the export sector," Prabhu told reporters at an event here to announce "Logix India 2019" global logistics meet to be held in January next year.The Federation of Indian Export Organisations has repeatedly called for increasing credit flow to the export sector so as not to hurt the growth of exports. The credit squeeze being felt by exporters is a part of the overall liquidity crunch in the economy that is also affecting industrial growth and which sparked off the recent tiff between the government and the Reserve Bank of India (RBI).The government's differences with the RBI centres on four issues -- the former wanted liquidity support to head off any credit freeze risk, a relaxation in capital requirements for lenders, relaxing the prompt corrective action (PCA) rules for banks struggling with accumulated non-performing assets (NPAs), or bad loans and support for micro, small and medium enterprises (MSMEs).
While the NPA crisis is a legacy of the lending boom during the high-growth years up to 2010, the current liquidity crunch, particularly among non-banking finance companies (NBFCs), follows a series of defaults last month by the privately-run Infrastructure Leasing and Financial Services (IL&FS) and banks hesitating to lend after a series of scams, most notably the Rs 14,000 crore fraud on state-run Punjab National Bank by two absconding diamond merchants. Bornali Bhandari of the National Council of Applied Economic Research noted even when world economic growth has picked up, Indian exporters have not been able to capitalise. Besides the declining export credit, she pointed out that Indian exports has been almost static around the $300 billion-mark for the past seven fiscals. "The world economy has picked up steam in the recent past, but Indian exporters have not been able to leverage world growth," she said."Instead, now we are again facing a decline in demand and the IMF has cut its world GDP growth estimate for the July-October period from 3.9 per cent to 3.5." Trade growth is likely to slow further into the fourth quarter of 2018, according to the World Trade Organisation's latest World Trade Outlook Indicator (WTOI) released on Monday."The continued moderation in the overall WTOI index was driven by the steady decline in the export orders index (96.6), which remains below trend and is approaching the weakest point recorded in 2012 during the eurozone crisis," the WTO said.