January 23, 2023

The biblical story of David and Goliath is oft used to voice the case of the underrepresented underdog winning the battle of right v. wrong, against the well-established, perceived as the arrogant giant. In this tale, the institutions envisioning services to citizens and legal entities, unfortunately have seemed to have gone astray, being adversarial to the ones which they have sought to serve. The Indian economy has made its  mark as the fastest growing economy in the world, having a 5.5% average GDP growth rate in the last decade. By 2031, India’s GDP is forecasted to surpass US $7.5 trillion by 2031. As per the Economic Survey of 2020-2021, India’s merchandise exports grew to US $301.4 billion- a 50% year on year growth, while having the 4th largest forex reserve in the world as of November, 2021. The top 10 commodities which were torchbearers for the Indian export growth story were: Petroleum products, Precious/semi-precious stones, Iron and Steel, Drug formulation & Biologicals, Gold & other jewellery, Organic chemicals, Electric machinery and equipment, Aluminum & its products, Iron & steel products and Marine Products. These top 10 commodities, account for 39.7% of total Indian exports, amounting to US $115 Billion (just between April and November, 2021). Therefore, exports form a strong sentinel    supplementing the Indian economy’s growth picture.  While global trade amounted to US $28.5 trillion in 2021, the quantum of merchandise exports was valued at US $17.6 trillion. Therefore, the market of global trade in exports is an ocean of wealth and opportunities. But as with every opportunity, comes a risk. There are a multitude of risks associated with exports and  trade across the world, in the unknowns.  “Export Credit Guarantee Corporation of India (ECGC) is a government company (under the control of the Ministry of Commerce and Industry). ECGC provides a range of credit risk insurance cover to exporters. Sidestepping, a quick glance at the Indian insurance sector would reveal that insurance penetration (calculated as the ratio of insurance premium to GDP) was 4.2%  in 2020.  The vision of ECGC states that it strives to support the Indian export industry by providing cost-effective insurance and trade-related services to meet the growing needs of the Indian Export market through optimal use of the available resources. The key motifs, which emerge in the ECGC’s vision are: firstly, to support the Indian export Industry, secondly to have cost effectiveness as a focal point and lastly, to deploy all its available resources. Though the conduct of the ECGC is quite contrary to its innate values. The ECGC prides itself on the fact that the claims ratio to outstanding commitment increased from 0.25% to 0.3% in 2020 vis a vis 2019. The data available in the public disclosures of the ECGC on the pendency of claims dawns a grim picture. From the years 2016-17 to 2019-20, the number of claims pending for 1 year to 5 years has seen a 267% increase, while the amount involved has  almost tripled. Similarly, the number of claims being processed in 6 months or less, between the years 2016-17 and 2019-20, has seen a sharp 103% increase. Juxtaposed, against 811 total claims pending in 2019-20, only 553 were settled, that means a settlement ratio of 0.4. It is alarming that while the numbering claims pending for 1-5 years is booming, the disposal of claims smacks of inefficiency. Another alarming fact is that though 553 claims were settled, it’s not known whether they were allowed or disallowed – and how many have been appealed. A corporation whose goal, identity, and business is vastly affected by claim dispensation, these numbers do not inspire confidence in the ECGC’s ability to deftly address the core (and only) consumer turmoil of claim resolution.  The objective of the National Export Insurance Account (NEIA) through its cover for projects aims to help make Indian project exports more competitive and gain a stronger foothold in regions of national strategic interest. Successful project will improve a sustained visible impact on India’s capacity to execute projects. Thus, the NEIA and in turn ECGC, seek to achieve important economic effects. Hedging risks will make the business of project exports more viable, and once more viable and lucrative a larger number of Indian businesses will aim to provide services abroad. The catalytic effect of such needs no enumeration, job creation, more forex, diplomatic collaborations. an increased strategic soft power among others. Each of these results, in turn spur further microeconomic benefits. A negative perception of the ECGC and its functions, loses consumer confidence, therefore hurting long term economic advantages, which are needless to explain. It is unfortunate that ECGC, which falls under the purview of the Ministry of Commerce and Industry, seems to miss the big picture, draining the efforts the Central government or the Ministry makes in promoting India as a political and economic superpower. With the advent of further infusion of funds as grant, the ECGC needs to reflect and plug in the holes in its systems and processes, to mitigate the loss in consumer confidence. It is crucial to note, that the Law Commission of India in 1984, while envisioning a litigation policy, had remarked that litigation could be avoided if the official machinery is more energetic, more sympathetic and more imaginative. But alas, this caution has fallen on deaf ears, much akin to the ECGC. As the analysis over the next few paragraphs will espouse, the organisation seems to be losing its core value to promote exports by hedging credit risks, and cloaking an autocratic approach lacking energy and sympath Let’s take a look at the claim resolution motif available in the public domain. For instance, in the Supreme Court judgement recently reported as Haris Marine Products v. Export Credit Guarantee Corporation Ltd., the appellant which was a manufacturer of fish meat and fish oil, in 2012 has exported some goods, secured by ECGC’s policy which covered the failure of foreign buyers to pay for the goods exported. The period of policy started from 14th December 2012,