‘ECLGS Extension Can Bolster MSMEs Amidst Global Demand Downturn’

The Federation of Indian Export Organisations (FIEO) has urged the central government to extend the benefits of the Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs till March 31, 2024. The exporters' body highlighted that certain MSME sectors are facing challenges because of reduced exports attributed to a global decline in demand.

The foremost association representing exporters has written a letter to Finance Minister Nirmala Sitharaman, urging the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) until the following year. Additionally, they have requested the reinstatement of a 5 per cent interest subsidy benefit for manufacturing Micro, Small, and Medium Enterprises (MSMEs).

The Federation of Indian Export Organisations (FIEO) has requested extending the Emergency Credit Line Guarantee Scheme (ECLGS) until March 31, 2024, emphasizing its critical role in assisting MSMEs in navigating these challenging times and facilitating their recovery when conditions improve.

“Amidst a backdrop of rising interest rates, MSMEs are encountering credit costs ranging from 8 per cent to 11 per cent. The interest equalization scheme's subvention had been reduced previously as interest rates were on a downward trend. However, given the substantial change in the economic landscape, there is a pressing need to reinstate the 5 per cent interest equalization benefit,” the export body suggested.

It's worth noting that MSMEs make up approximately 40 per cent of India's total exports. India's exports registered a decline of 6.86 per cent to USD34.48 billion in August, marking the seventh consecutive monthly decline, primarily due to reduced shipments from key sectors such as petroleum and gems and jewellery, resulting from subdued global demand.

The trade deficit, representing the variance between imports and exports, reached its highest level in ten months, standing at USD 24.16 billion. From April to August in this fiscal year, cumulative exports declined by 11.9 per cent, amounting to USD 172.95 billion. July witnessed a significant drop of 15.88 per cent in India's exports.

Several export sectors experienced negative growth in the month of August, including tea, coffee, rice, spices, leather, gems and jewelry, textiles, and petroleum products.

What Is Emergency Credit Line Guarantee Scheme (ECLGS)?

The Emergency Credit Line Guarantee Scheme (ECLGS) was designed to provide crucial assistance to eligible Micro, Small, and Medium Enterprises (MSMEs) and business entities. Its primary aim was to help them address their operational obligations and restart their operations in response to the disruptions caused by the COVID-19 pandemic. The scheme was launched in May 2020 as a component of the 'Aatmanirbhar Bharat Campaign'.

The goal of the scheme was to offer support to small businesses that were grappling with the challenges of meeting their operational commitments due to the nationwide lockdown imposed in response to the pandemic.

Under this initiative, the National Credit Guarantee Trustee Company (NCGTC) extended a 100 per cent guarantee to Member Lending Institutions (MLIs), banks, financial institutions, and Non-Banking Financial Companies (NBFCs).