India Fiscal Stimulus Package Offers Exporters Credit Relief

The Indian government’s announcement of a two percent credit relief on the interest of pre- and post-shipment credit to exporters was welcomed Monday by the local diamond and jewelry industry.

The two percent “subvention” as the official announcement called the credit relief, was one of the announced measures by the Indian government that form the fiscal stimulus package to help boost the Indian economy. The relief will be applicable till March 2009, and is subject to a minimum seven percent annual interest.

The government also announced an additional Rs 11 billion ($224 million) which among other things will also cover refund of service tax on foreign agent commissions of up to 10 percent of FOB value of exports.

“Though the government intervention falls short of the four percent relief that we had asked for, we believe that it is a positive signal of support for the export sector which is currently facing pressure on many fronts,” said Gem and Jewellery Export Promotion Council (GJEPC) Chairman Vasant Mehta.

“We are confident that there will be some follow up steps as well,” he added. The GJEPC welcomed the announcement, while asking for a more comprehensive package that will address other concerns of the diamond and jewelry industry in the current economic situation.

The GJEPC is seeking easier access to dollar finance, an increase in gold loans and, most importantly, measures to ensure better availability of gold across the country.

“Many nominated agencies have expressed their inability to supply gold to units in smaller towns, saying that they find it ‘uneconomical’ in the present conditions,” notes Mehta. “This non-availability of gold is one of the factors that has contributed to the 23 percent slump in exports of gold jewelry during the last few months, and needs to be addressed urgently.”

“We have therefore suggested that the government allow recognized exporters to import gold directly and supply this to manufacturers across the country,” Mehta added. 

Meanwhile, the Gem and Jewellery Committee of the Federation of Indian Chambers of Commerce (FICCI), an apex industry body, has also petitioned the government. Some of the measures suggested by the committee include an increase in the amount of loan against gold, raising the pre-shipment finance period to 180 days from 90 days and reduction in Statutory Liquidity Ratio (SLR) requirements to make bullion loans attractive to banks.