India's Exports May Not Sustain High Growth: Ficci.

India's exports may not sustain high growth because high inflation and increasing interest rates would dent the competitive edge of the country's shipments in the global market, a Ficci survey on Sunday said.

The chamber released the findings of the survey a day after the government released the trade data showing an impressive growth rate of 45.7 per cent to USD 79 billion during April-June quarter of this fiscal.

"While the last few months have seen the performance of India's export sector surpass all expectations, this strong growth performance is not likely to be sustained in the months ahead," it said.

The survey said that a series of factors and developments are weighing heavily on the exporters' fraternity making them a little less confident about their near-term export performance.

The end of interest subsidy scheme for exporters, has pushed the interest rates being charged by banks for export credit. The scheme ended on March 31, 2011.

"...as withdrawal of interest subvention scheme has happened at a time when lending rates are going up following increase in the base rates of banks, the impact on production cost structure is aggravated," it said.

With inflation, which is over 9 per cent, emerging as a key macro challenge in many countries in Asia and with interest rates being hiked, demand in the Asian region is likely to ease in the coming months.

The RBI , which hiked interest rates 10 times in the last 15 months, has said it will continue with its tight monetary policy as inflation is spreading to the non-food segment also, which is a concern.

"This too will have a bearing on India's export performance," it said, adding the likely end of popular tax benefit scheme - DEPB - in September would further put pressure on exporters to maintain their competitiveness in the global market.

Majority of the respondents said that rising cost of raw material and oil are adversely affecting the performance.

An overwhelming majority of 212 participants felt that increase in the prices of industrial raw material like cotton, polymers, steel and natural rubber are hurting sectors like textiles, chemicals, tyre and engineering.

"...rising cost of oil is having a negative bearing on export performance. It has led to an increase in the inland transportation and international ocean freight rates," it said.

About 70 per cent of the participants said that they will increase prices of exports in the coming six months. "This is expected to lead to a reduction in orders from overseas markets," it said.

Commerce Secretary Rahul Khullar also expressed concerns over uncertainties in the big markets of the US and Europe stating the "summer is not over".

Source : economictimes.indiatimes.com