The Interest Equalization Scheme (IES) is a financial support scheme implemented by the Government of India to provide interest rate subvention or reimbursement to exporters on their pre- and post-shipment export credit. The scheme aims to enhance the competitiveness of Indian exporters by reducing their borrowing costs and improving access to affordable credit for export-oriented activities. Here's a detailed overview of the Interest Equalization Scheme:
**Objective:**
1. **Enhancing Export Competitiveness:** The primary objective of the Interest Equalization Scheme is to make Indian exports more competitive in the global market by reducing the cost of credit for exporters.
2. **Promoting Export Credit:** The scheme aims to facilitate access to affordable credit for exporters, especially small and medium-sized enterprises (SMEs), by providing interest rate subvention on export credit.
**Key Features:**
1. **Interest Subvention:** Under the IES, exporters receive interest rate subvention or reimbursement on their pre- and post-shipment export credit. The government subsidizes a portion of the interest cost incurred by exporters on such credit.
2. **Eligible Sectors:** The scheme covers various sectors, including manufacturing, agriculture, textiles, handicrafts, and other export-oriented industries.
3. **Eligible Exporters:** Both direct and indirect exporters, including manufacturers, merchant exporters, and service providers, are eligible to avail benefits under the scheme.
4. **Eligible Products:** The scheme applies to all goods and services eligible for export, including manufactured goods, agricultural products, processed foods, textiles, handicrafts, and engineering goods.
**Implementation:**
1. **Role of Banks:** Banks and financial institutions are responsible for implementing the Interest Equalization Scheme by providing export credit to eligible exporters at the subsidized interest rates prescribed under the scheme.
2. **Application Process:** Exporters apply for export credit with their respective banks, specifying their eligibility for interest equalization benefits under the scheme. Banks verify the eligibility criteria and extend the subsidized credit accordingly.
3. **Claim Process:** Banks submit claims to the nodal agency designated by the government for reimbursement of the interest subvention provided to exporters. The nodal agency processes the claims and disburses the reimbursement to the banks.
**Benefits:**
1. **Cost Reduction:** The scheme reduces the cost of borrowing for exporters by providing interest rate subvention, making export credit more affordable and accessible.
2. **Enhanced Competitiveness:** Lower borrowing costs improve the competitiveness of Indian exports in international markets, enabling exporters to offer competitive prices and secure more orders.
3. **Improved Cash Flow:** Exporters benefit from improved cash flow as a result of reduced interest expenses on export credit, allowing them to allocate resources more efficiently and invest in business growth.
**Conclusion:**
The Interest Equalization Scheme is a valuable initiative aimed at supporting Indian exporters by providing interest rate subvention on export credit. By reducing the cost of borrowing and enhancing competitiveness, the scheme contributes to the growth and expansion of India's export sector, thereby fostering economic development and job creation in the country.
