Union Cabinet Allocates Rs 2,500 Crore for Extended Interest Equalisation Scheme

The Union Cabinet, led by Prime Minister Narendra Modi, has sanctioned an additional Rs 2,500 crore for the Interest Equalisation Scheme. The scheme is extended until June 30, 2024, aiming to support exporters from specific sectors and all MSME manufacturer exporters.

Objective of the Scheme

Facilitate pre and post-shipment Rupee export credit at competitive rates.
Continue benefiting manufacturer and merchant exporters in identified tariff lines.
Foster growth in the MSME sector, crucial for employment generation.

Interest Equalisation Rates

Manufacturer and Merchant Exporters in 410 tariff lines: 2% interest equalisation.
MSME Exporters across all tariff lines: 3% interest equalisation.

Implementation and Monitoring

Implementation through RBI and various public/private sector banks.
Joint monitoring by DGFT and RBI through a consultative mechanism.

Scheme Impact

Positive impact on export growth, supported by a study conducted by IIM Kashipur.
Focus on labour-intensive sectors, particularly vital for MSMEs.
Promotes employment generation by boosting exports in targeted sectors.

Additional Funding Details

Rs 2,500 Crore supplementary allocation to bridge funding gap.
Total outlay increased to Rs 12,038 Crore.
Annual expenditure estimated at approximately Rs 2,500 Crore.

Target Beneficiaries

All MSME manufacturer exporters.
Non-MSME exporters in identified sectors (410 tariff lines at the four-digit level).

Historical Context

Scheme initiated on April 1, 2015.
Originally valid for five years until March 31, 2020.
Continuation during COVID with extensions and fund allocations.
Scheme transformed from being unlimited to fund-limited.

Revised Scheme Limits

Capped benefits at Rs 10 Crore per annum per IEC.
Banks lending at rates exceeding Repo + 4% are excluded from the scheme.

Questions Related to Exams

Q: What is the recent decision by the Union Cabinet?

A: The Union Cabinet approved an additional Rs 2,500 crore for the Interest Equalisation Scheme, benefiting exporters and MSMEs until June 2024.

Q: What are the interest equalisation rates under the scheme?

A: Manufacturer and Merchant Exporters receive a 2% interest equalisation, while MSME Exporters enjoy a 3% rate.

Q: How is the scheme implemented and monitored?

A: The RBI implements it through banks, with joint monitoring by DGFT and RBI.

Q: What’s the impact on export growth and employment?

A: IIM Kashipur’s study indicates a positive impact on export growth, especially beneficial for labor-intensive sectors and MSMEs, contributing to employment generation.

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