Interest Equalisation Scheme Extension

January 18, 2025

The Indian Commerce Ministry is advocating for a further extension of the Interest Equalisation Scheme (IES) in the upcoming Budget. This initiative aims to boost export activities amid ongoing global economic challenges. The scheme, which provides financial support to exporters, is set to expire soon, and stakeholders are urging its continuation to maintain competitiveness in international markets.

Background of the Scheme

The Interest Equalisation Scheme was launched on April 1, 2015. Initially valid for five years, it aimed to support exporters by providing pre- and post-shipment rupee export credit at lower interest rates. The scheme was extended multiple times, including during the COVID-19 pandemic.

Current Status

As of December 31, 2024, the scheme is scheduled to end. The government has disbursed Rs 2,641.28 crore from an allocated budget of Rs 2,932 crore for the period from April 2023 to November 2024.

Financial Benefits

Exporters receive a 2% interest equalisation benefit on rupee export credit for 410 identified tariff lines. MSME manufacturer exporters benefit from a higher rate of 3%. The cap for individual exporters has been raised to Rs 50 lakh per annum per Import Export Code (IEC).

Implementation and Monitoring

The Reserve Bank of India (RBI) administers the scheme through public and private banks. The Directorate General of Foreign Trade (DGFT) and RBI jointly monitor the scheme’s implementation and effectiveness.

Export Sector Impact

The scheme targets various sectors, including handicrafts, leather, and textiles, enhancing their international competitiveness. Exporters argue that the IES is crucial for maintaining market presence against countries like China, where interest rates are lower.

Future Prospects

The Commerce Ministry is expected to propose a budget extension for the IES to ensure continued support for exporters. The Federation of Indian Export Organisation (FIEO) advocates for this extension, denoting its importance in turbulent economic times.

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