India’s small and medium exporters have been facing unprecedented challenges due to recent U.S. tariff hikes, which have increased operational costs and dented global competitiveness. In a bid to safeguard these businesses, the government has announced a ₹40 crore Credit Guarantee Rollout under the Export Credit Guarantee Corporation (ECGC) framework. This measure aims to ensure liquidity, reduce credit risks, and help exporters retain their global market presence despite the tariff shock.
What Is the ₹40 Crore Credit Guarantee Scheme?
The Credit Guarantee Scheme is designed to protect exporters by providing financial institutions with a government-backed guarantee on loans extended to them. This reduces the perceived risk for banks and ensures that small exporters can continue accessing credit even in uncertain global trade environments.
Key Features:
Corpus: ₹40 crore
Coverage: Primarily for small and medium-sized exporters
Risk Coverage: Up to 80% of loan amount in case of default
Duration: Initially set for one fiscal year, extendable based on impact assessment
Why Small Exporters Are in Trouble
Recent trade tensions and tariff adjustments from the U.S. have led to:
Increased cost of goods – making Indian exports less competitive.
Delayed payments – overseas buyers are renegotiating contracts.
Reduced orders – due to higher import duties in the U.S. market.
Small exporters, who often operate on thin margins and rely heavily on timely payments, are at risk of cash flow crises.
How the Credit Guarantee Will Help
Liquidity Support: Exporters can continue operations without disruption.
Confidence Boost: Banks are more willing to lend with government backing.
Global Competitiveness: Allows exporters to fulfill contracts without price hikes.
Risk Mitigation: Protects businesses from defaults caused by delayed or cancelled orders.
Government’s Broader Strategy
This rollout is part of India’s larger export promotion plan, which also includes:
Diversifying export markets beyond the U.S.
Offering marketing assistance for exporters to tap European and ASEAN markets.
Providing tax rebates under the RoDTEP scheme.
Expert Insights
Trade analysts believe this move could stabilize the export sector in the short term, but stress that long-term resilience will require structural reforms, such as enhancing product value chains, improving trade agreements, and investing in digital export platforms.
Conclusion
The ₹40 crore Credit Guarantee Scheme is more than just a financial cushion—it’s a strategic lifeline for India’s small exporters in an increasingly protectionist global market. While the U.S. tariffs may have rattled the sector, this initiative shows India’s commitment to shielding its exporters and maintaining its global trade footprint.
FAQs
1. Who is eligible for the ₹40 crore Credit Guarantee Scheme?
Small and medium-sized exporters with significant exposure to the U.S. market and impacted by tariff hikes are eligible.
2. How can exporters apply for the scheme?
Applications can be made through participating banks that are tied up with the Export Credit Guarantee Corporation (ECGC).
3. What percentage of the loan is covered under the guarantee?
Up to 80% of the loan amount is covered in case of default.
4. Is the scheme only for exporters dealing with the U.S.?
While the primary target is exporters impacted by U.S. tariffs, other exporters facing severe trade barriers may also be considered.
5. How long will the scheme last?
It is initially rolled out for one fiscal year but may be extended depending on results.
Published on : 12th August
Published by : SMITA
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