Govt. to expand definition of ‘political risk’ under export guarantee scheme

Context: The Foreign Trade Policy (FTP) of 2023 allows exporters to get insurance coverage for losses caused by sudden trade barriers, and addresses grievances of exporters through a ministerial panel. 

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The new Foreign Trade Policy (FTP) for India in 2023 intends to broaden the scope of “political risk” covered under the export guarantee scheme, enabling exporters to receive insurance coverage for losses incurred due to the sudden imposition of non-tariff barriers by importing nations after the shipment has left India.

The policy also proposes the establishment of a ministerial panel to address the concerns of small exporters and an inter-ministerial committee to investigate trade-related grievances of micro, small, and medium enterprises (MSMEs).

This is expected to provide greater support to Indian exporters and improve their ability to navigate challenges posed by trade barriers.

Export Credit Guarantee Scheme

  1. It is a scheme to provide enhanced export credit risk insurance cover to the extent of 90% to support small exporters under the Export Credit Insurance for Banks Whole Turnover Packaging Credit and Post Shipment (ECIB- WTPC & PS).  
  2. It is expected to benefit a number of small-scale exporters availing of export credit with banks which hold the ECGC WT-ECIB covers. 
  3. This will also enable the small exporters to explore new markets/new buyers and diversify their existing product portfolio competitively.
  4. Enhanced Cover to Banks 
    • The enhanced cover shall be available for manufacturer- exporters availing fund-based export credit working capital limit up to ₹ 20 crore (i.e., total Packaging Credit and Post Shipment limit per exporter/exporter-group) excluding the Gems,  Jewellery & Diamond sector and merchant exporters/traders.
    • This new scheme will enable the banks holding ECGC’s WT-ECIB cover to explore the possibility of reducing interest rates further so that all the stakeholders are benefitted. 

Export Credit Guarantee Corporation (ECGC)

  • Established in 1957 and fully owned by the government of India, the Export Credit Guarantee Corporation of India Ltd. (ECGC) was created to boost exports from the country by offering credit risk insurance and associated services for exports. 
  • ECGC manages the National Export Insurance Account (NEIA) Trust, which caters to project exports of national and strategic importance. 
  • ECGC provides (i) a range of insurance covers to Indian exporters against the risk of non-realization of export proceeds due to commercial or political risks (ii) different types of credit insurance covers to banks and other financial institutions to enable them to extend credit facilities to exporters and (iii) Export Factoring facility for MSME sector which is a package of financial products consisting of working capital financing, credit risk protection, maintenance of sales ledger and collection of export receivables from the buyer located in overseas country.

UPSC Prelims 2022:

Consider the following statements:

1. Vietnam has been one of the fastest growing economies in the world in the recent years.

2. Vietnam is led by a multi-party political system.

3. Vietnam’s economic growth is linked to its integration with global supply chains and focus on exports.

4. For a long time Vietnam’s low labour costs and stable exchange rates have attracted global manufacturers.

5. Vietnam has the most productive e-service sector in the Indo-Pacific region.

Which of the statements given above are correct?

(a) 2 and 4

(b) 3 and 5

(c) 1, 3 and 4

(d) 1 and 2

Ans. (c)

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