In a decisive move to protect domestic businesses from global trade shocks, the Government of India is set to launch credit guarantees for small firms and exporters affected by US tariffs. This initiative aims to shield Indian companies from liquidity constraints, maintain export competitiveness, and safeguard jobs in the manufacturing and export sectors.
The measure comes amid rising concerns about the impact of US-imposed tariffs on Indian products such as steel, textiles, and agricultural goods. By offering credit guarantees, the government ensures that affected businesses continue to have access to affordable funding despite trade disruptions.
Key Features of the Credit Guarantee Scheme
Beneficiaries: Small and medium-sized enterprises (SMEs), exporters facing tariff-related revenue losses.
Type of Support: Partial or full government-backed credit guarantees to ease access to loans.
Objective: Maintain working capital, support production, and preserve employment levels.
Impact Scope: Across key export-oriented sectors affected by tariffs, including textiles, steel, chemicals, and agro-products.
Why the Scheme is Important
Mitigates Financial Stress – SMEs often face high borrowing costs; credit guarantees reduce the risk for banks, allowing easier loan approvals.
Boosts Export Competitiveness – Provides liquidity for businesses to sustain operations despite additional trade costs.
Preserves Employment – Helps prevent layoffs in sectors directly impacted by global trade policies.
Encourages Investment – Assures small firms that the government supports trade resilience, encouraging them to invest in production and exports.
Potential Impact on India’s Economy
Strengthens SMEs: Ensures smaller firms remain competitive internationally.
Maintains Export Revenue: Helps stabilize India’s foreign exchange earnings.
Reduces Default Risk: Banks face lower credit risk with government-backed guarantees.
Supports Make in India Vision: Encourages domestic production and export growth, aligning with long-term industrial policy goals.
How Businesses Can Benefit
Eligible exporters and SMEs can apply through banks or financial institutions participating in the scheme.
Guaranteed credit lines reduce interest rates and improve access to working capital.
Companies facing revenue losses due to US tariffs can sustain production without facing liquidity crunches.
FAQs
Q1. What is the purpose of the credit guarantee scheme?
To provide financial support to SMEs and exporters affected by US tariffs, ensuring business continuity and export competitiveness.
Q2. Who is eligible for the scheme?
Small and medium-sized enterprises and exporters in sectors impacted by tariffs such as textiles, steel, chemicals, and agricultural products.
Q3. How does the scheme help banks?
By offering government-backed credit guarantees, the risk of loan default is reduced, making banks more willing to lend.
Q4. What sectors will benefit the most?
Textiles, steel, chemicals, agro-products, and other export-oriented industries facing trade restrictions.
Q5. How will this affect India’s export performance?
It is expected to stabilize exports, protect revenue streams, and support long-term growth in key sectors.
Published on : 23rd August
Published by : SMITA
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