Higher borrowing costs could increase financial burden on exporters: FIEO

NEW DELHI: Apex exporters body FIEO on Wednesday said higher borrowing costs could increase the financial burden on exporters, particularly MSMEs, at a time when global trade is facing heightened uncertainty.

The statement came in the backdrop of the RBI raising the policy repo rate by 25 basis points to 5.5 per cent.

Federation of Indian Export Organisations (FIEO) President S C Ralhan said that the RBI's decision to raise the repo rate is understandable against the backdrop of rising inflationary pressures and the need to maintain price stability.


Monetary tightening, he said, does constrain the working capital availability for export-oriented businesses, particularly MSMEs.

“Exporters are currently operating in an exceptionally uncertain global environment. Geopolitical tensions, volatile energy prices, supply-chain disruptions, longer transit times and delays in payments are extending the export working-capital cycle. Higher interest costs in such circumstances can adversely affect the competitiveness of Indian exporters, especially those operating on thin margins,” he said.

Ralhan urged the RBI to provide greater flexibility in export finance by extending the period of pre-shipment and post-shipment export credit from the existing 270 days to 450 days because of longer shipping and transit periods, logistics disruptions and delayed realisation of export proceeds.

Such an extension, he said, would provide much-needed breathing space to exporters and enable them to honour their international commitments without facing undue financial stress.

FIEO further suggested that targeted liquidity support and adequate availability of affordable export credit should accompany the calibrated tightening stance.

“This would help exporters absorb elevated input and financing costs while maintaining production, fulfilling overseas orders and exploring new markets,” Ralhan said.

The change in the RBI's monetary policy stance to calibrated tightening is understandable in view of emerging inflationary pressures.

“However, the Federation cautioned that higher borrowing costs could increase the financial burden on exporters, particularly MSMEs, at a time when global trade is facing heightened uncertainty,” he added.