INTEREST EQUALISATION SCHEME (IES) EXTENSION PROPOSAL

PRELIMS BITS: 

Overview:
The Indian Commerce Ministry is pushing for the extension of the Interest Equalisation Scheme (IES) in the upcoming Budget to continue supporting exporters amid global economic challenges. The scheme, which is set to end on December 31, 2024, provides financial assistance through lower interest rates on export credit, helping Indian exporters maintain their competitiveness in global markets.

Scheme Background:

• Launched on April 1, 2015, with an initial five-year term.
• Extended multiple times, including during the COVID-19 pandemic.
• Aims to provide pre- and post-shipment rupee export credit at reduced interest rates.

Current Status:

• The scheme is scheduled to end by December 31, 2024.
• Disbursement of Rs 2,641.28 crore from the allocated budget of Rs 2,932 crore (April-November 2024).

Key Benefits:

• Exporters receive a 2% interest equalisation benefit on export credit for 410 identified tariff lines.
• MSME manufacturers enjoy a higher rate of 3%.
• The cap for individual exporters is increased to Rs 50 lakh per year per Import Export Code (IEC).

Implementation:

• Administered by the Reserve Bank of India (RBI) through public and private banks.
• Jointly monitored by the RBI and Directorate General of Foreign Trade (DGFT).

Impact on Export Sectors: The scheme supports sectors such as handicrafts, leather, and textiles, enhancing their global market presence. Exporters emphasize its importance to stay competitive against countries like China with lower interest rates.

Future Prospects: The Federation of Indian Export Organisations (FIEO) is advocating for the extension, highlighting its critical role in maintaining export growth during uncertain economic times.