Apart from higher costs and other difficulties, the disruption caused by the two war zones in the world has added to the liquidity woes of India’s exporters as they deal with longer payment schedules and the impact of the situation on export credit which is falling consistently since 2022.
At the end of March 2022 quarter the outstanding export credit was at Rs 2.27 lakh crore and by the end of March this year it was down to Rs 2.17 lakh crore. Some part of the export credit that is given to agriculture and micro, small and medium enterprises comes under Priority Sector Lending (PSL).
The export credit under PSL was down to Rs 11530 crore in August-end from Rs 21599 crore in August of 2022. While exports grew 15% between 2021-22 and 2023-24, the export credit has fallen by 5%.
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On top of falling credit, the Red Sea disruptions have added to the liquidity pressures on exporters as payments are taking more time. “Their (exporters’) goods are taking more time for delivery and because of the slowdown in the major markets, offtake is slow. All this has increased the time period of payment from less than 90 days to 120-150 days,” director general and chief executive officer of Federation of Indian Export Organisations (FIEO) Ajay Sahai said.
The exporters now require more credit for a longer period and costs for them have increased, he said. Despite the Export Credit Guarantee Corporation (ECGC) increasing the coverage of default in payment against exports to 90%, many of the banks have not reduced the collateral requirements which is also reducing the credit off-take by the sector.
Some of the exporters have turned to the domestic market in view of the disruptions. In sectors like ceramics where the weight of the product and thus cost of transportation is more, the products are finding their way into the local markets,
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