The Role of Export Credit Agencies in a Fast‐growing BRIC Economy
| Date | 01 February 2013 |
| DOI | http://doi.org/10.1111/1758-5899.12023 |
| Author | Geetha Muralidhar |
| Published date | 01 February 2013 |
The Role of Export Credit Agencies in
a Fast-growing BRIC Economy
Geetha Muralidhar
Executive Director, Export Credit Guarantee Corporation of India
Brazil, Russia, India and China (often referred to as the
BRIC economies) encompass a population of three billion
people, which is around 40 per cent of the world’s popu-
lation. They occupy a landmass that represents a quarter
of the Earth’s total land area and contribute $13.7 trillion
to the world’s total GDP. BRIC are projected to become
four of the six target economies by 2050 by the World
Bank. Their foreign exchange reserves total $4 trillion
and exports are clocked at $2.5 trillion, which amounts
to 16 per cent of the world’s merchandise exports. With
such impressive statistics, it is little wonder that they are
considered to be the future engines of global economic
growth. They are also the growth drivers for the low-
income countries (LICs): the latter’s exports to the BRIC
economies are around half the value of their trade with
the EU and the US. Despite apprehension about the
group not being cohesive enough to make a significant
impact, it is worthwhile to note that the transcontinental
dimension intensifies trade flows across the world.
India, one of the fastest-growing economies in BRIC, is
expected to grow at 7.2 per cent for 2012–13 while aver-
age GDP growth rates in the world are hovering around
2 per cent. Hence with the large-base effect, India will
continue to be one of the fastest-growing nations in the
world. India’s GDP on purchase power parity (PPP) basis
is projected to rise from the fourth rank in 2009 ($3752
billion) to second in 2050 ($43,180 billion), overtaking
even the US. India’s share of world GDP is slated to grow
to 13 per cent on market exchange rate basis (MER) by
2050. It has the potential to be the fastest-growing large
economy, with a GDP that will even be 14 per cent lar-
ger than that of the US on PPP basis by 2050. India’s
trend growth is also expected to overtake China’s in the
coming decade because of its younger working-age pop-
ulation and the fact that it started from a lower level of
economic development.
As a share of global output, trade is now more than
four times its level in the early 1950s. Just as world trade
has grown faster than the world’s output, the country’s
trend in trade has also been outpacing the economic
rise. Indian trade’s share as a percentage of the country’s
GDP has been growing, and the exports and imports
now contribute 60 per cent of GDP compared to 25 per
cent a decade ago. While the world’s GDP is expected to
rise at rates of between 2.5 per cent and 3 per cent by
2015, the growth in world trade would continue to rise
from 5.8 per cent to 6.4 per cent. The merchandise trade
of India as a percentage of GDP climbed from 30.5 per
cent in 2007 to 40.5 per cent in 2011. India is ranked
among the top 20 exporting nations in goods and mer-
chandise, and among the top ten in services exports.
India could boast the highest export growth rate (16.1
per cent) in 2011, topping the list of all major trading
countries and overtaking China, which grew at 9.3 per
cent. Export of goods and services as a percentage of
GDP has been increasing steadily and is expected to inch
up further from 25 per cent to 28 per cent in the imme-
diate future.
India’s track record of steady growth in exports is sup-
ported by two export-promoting institutions: the Export
Credit Guarantee Corporation of India Limited (ECGC)
and the Export-Import Bank of India (Exim Bank). The for-
mer was set up in 1957 and has been the pioneer in the
export credit insurance and guarantee industry in the
whole of Asia. Exim Bank was set up 25 years later in
1982 to fill the need for a financial institution for med-
ium- and long-term exports. This system ensures that
financing and insurance agencies are kept separate and
are governed by respective regulators –unlike in some
countries, where both functions are performed by a
single agency.
Exim Bank has been the nodal agency for promoting
‘project exports’in the last three decades and has been
actively encouraging Indian firms to participate in over-
seas opportunities. As of 31 March 2012, 341 export con-
tracts were under execution in 62 countries by 74 Indian
companies with support from Exim Bank. It also fronts
the Indian government’s lines of credit (LOCs) to various
low-income countries, which also serve as an effective
market-entry mechanism. As of 31 March 2012, the bank
had 157 operational LOCs covering 75 countries. The
bank also extends buyers credit to enable Indian compa-
nies to participate in competitive bidding for projects
overseas.
Over the last 55 years, ECGC’s mission has been to
support the Indian export industry by providing
©2013 University of Durham and John Wiley & Sons, Ltd. Global Policy (2013) 4:1 doi: 10.1111/1758-5899.12023
Global Policy Volume 4 . Issue 1 . February 2013
112
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