The Indian export sector has been facing challenging headwinds in recent times. As per government data, India’s exports contracted for the fifth straight month in December 2019, declining by 1.8% year-on-year. This slowdown has raised concerns among exporters about credit availability to run their operations smoothly.
In the face of slowing exports, the Union Finance Minister introduced the Nirvik Scheme while presenting the Union Budget 2020-21 to provide greater insurance coverage and boost exports.
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NIRVIK Meaning
The scheme, officially known as Niryat Rin Vikas Yojana, encourages exporters with high insurance coverage to invest and expand their business. It is being introduced as a new initiative to increase export credit disbursement by providing loans to all eligible exporters.
The Finance Ministry has set a goal of enabling investment of Rs 100 lakh crores over the next five years through this scheme. All exporters will receive up to 90% insurance coverage on their credit outstanding under the NIRVIK Scheme.
The scheme aims to provide high insurance coverage for exporters to expand their businesses and reduce premium rates to boost exports and address their financing needs.
Let’s discuss the NIRVIK scheme in detail.
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What is the NIRVIK Scheme?
The Niryat Rin Vikas Yojana, introduced by the central government and inaugurated by Union Finance Minister Nirmala Sitharaman, addresses financial instability for small exporters by providing increased insurance coverage.
This scheme aims to boost funding availability for small exporters. It was formulated by India’s Ministry of Commerce and introduced in the budget by the Export Credit Guarantee Corporation of India (ECGC).
This post offers a comprehensive overview, outlining eligibility criteria and required paperwork for those interested in leveraging the benefits of the NIRVIK Scheme.
Objectives of the NIRVIK Scheme
- Offer high insurance coverage to exporters to grow their business
- Enable small exporters to reduce their insurance premium rates
- Provide a 60% credit guarantee to exporters in case of any payment loss
- Facilitate increased credit lending to small exporters for higher exports
- Simplify the claims settlement process for easier administrative procedures
As per government data, India’s exports reduced by 1.96% while imports declined by 8.9% in the December 2019-April 2020 period. Consequently, a trade deficit of around $118.10 billion was said to be reported. The NIRVIK scheme aims to address such issues being faced by Indian exporters.
Eligibility for the NIRVIK Scheme
The NIRVIK scheme targets small exporters. Here is the eligibility criteria:
- The scheme applies only to small exporters.
- Indian citizens owning an export business can apply.
- Exporters with total credit outstanding of up to ₹80 crore are eligible.
- This makes the scheme applicable for Micro, Small and Medium Enterprises (MSMEs) engaged in exports.
Documents Required for NIRVIK Scheme
Exporters interested in the NIRVIK scheme must keep the below documents ready for a smooth application process:
- Business Registration Papers: Depending on the type of export agency, all official paperwork is required as proof of a legitimate business
- GST Certificate: Small exporters need to hold a valid GST registration issued by the Goods and Services Tax Network
- PAN Card: The PAN card issued in the name of the exporting organisation is mandatory
- Identity Proof: In the case of a business partnership firm or a proprietorship firm, identity proof of all partners/proprietors, such as Aadhaar, is required
- Bank Loan Documents: If working capital bank loans have been availed, all related loan paperwork needs to be furnished
- Insurance Documents: Prior insurance policies and claims documents need to be submitted
Key Features of the NIRVIK Scheme
The NIRVIK scheme comes loaded with attractive features aimed at improving the ease of doing business and enhancing credit flow for exporters:
- Streamlined Loan Application
The NIRVIK scheme aims to ease processes for exporters by streamlining loan applications through banks. This structure supports hassle-free credit access to boost business growth for small players.
- Competitive Interest Rates
Small exporters can avail of highly affordable credit with low-interest rates of less than 8% per annum. This funding can be directed towards business expansion.
- High Insurance Cover
The scheme enables exporters to operate confidently by providing a high 90 per cent insurance cover on principal and interest amounts. This safety net mitigates typical international trade risks.
- Low Insurance Premiums
Insurance affordability is ensured with massive premium reductions from 0.72 per cent to just 0.60 per cent. Subsidized premiums free up valuable working capital.
- Five-Year Validity
The backing for the NIRVIK scheme over a 5-year tenure brings predictability for small businesses to grow without disruption of benefits.
Enabling Lending Environment
The NIRVIK scheme provides a government-backed guarantee mechanism to encourage banking institutions towards greater export credit disbursement. This provision empowers risk-averse lenders to extend higher credit to exporters.
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Benefits for Exporters
| Lower Export Credit Costs:- By directly reducing capital costs through insurance premium subsidies, NIRVIK enhances the competitive strength of Indian exporters. | Easy Availability of Funds :- The assurance of government guarantee prompts banks to lend more freely to exporters, facilitating easy access to finance. |
| Increased Liquidity:- Fast settlement of claims under NIRVIK boosts liquidity for exporters’ smooth business operations and consistent working capital scaling. | Competitiveness:- Lower input costs due to process efficiencies and premium subsidies make Indian exports more cost-competitive locally and globally. |
| Lower Insurance Costs & Tax Benefits :- Affordable insurance coupled with potential tax incentives reduces financial burdens enabling higher productivity and lending capabilities. | Stable Exchange Rates:- Effective hedging against foreign exchange volatility supports exporters to plan international operations more effectively. |
| Business Growth :- By adequately backing credit availability despite risks, NIRVIK enables capable small exporters to expand capacities and ascend global value chains. | Risk Mitigation :- The NIRVIK scheme minimizes multiple risks like demand fluctuations and payment defaults faced by exporters, especially MSMEs. |
Future Scope
Per government estimates, the NIRVIK scheme can directly benefit nearly 40 lakh small exporters countrywide, with a special focus towards empowering the MSME export sector.
Industry projections indicate over $10 billion potential annual export value addition achievable within the scheme’s 5-year term. This signals NIRVIK’s massive capacity to catapult Indian MSME exporters higher up the global league.
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Recent Developments
The Indian government recently approved a comprehensive revamp of the Export Credit Guarantee Corporation (ECGC) towards aligning it with global best practices concerning trade credit insurance and guarantees. The approved ECGC revamp plan aims to boost its business operations and sharpen its focus on offering export credit insurance solutions in line with internationally competitive standards.
Industry experts have hailed the ECGC revamp approval as a precursor to the imminent rollout of the NIRVIK scheme.
The bolstering of ECGC, the apex institution for export credit guarantees, is seen as a strategic move to boost India’s trade competitiveness. The revamped ECGC is expected to administer the NIRVIK scheme optimally to extend timely relief for the country’s struggling exporters, especially the MSME players.
Conclusion
The NIRVIK scheme adopts a pragmatic, multifaceted approach to financial inclusion and self-reliance in priority export sectors. Addressing capital and insurance accessibility, it unlocks sustainable growth for small business exporters. NIRVIK’s measures, including process efficiency and government support, act as catalysts for the large-scale export capabilities of Indian MSMEs.
Designed for competitive collaboration, NIRVIK empowers indigenous small businesses to ascend global value chains, driving export-driven growth. The streamlined framework and incentives represent a pragmatic approach toward accelerating financial inclusion and self-reliance.
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