Engg goods redirected to Russia, LatAm & Africa.

The country’s engineering industry is tweaking its export strategy to tide over the weak sentiments in the Euro zone. With euro crisis looming large, engineering goods exporters are turning to locales like Russia and Latin America and South Africa to maintain last fiscal’s export of $38 billion. In FY10, engineering exports had declined by 20% to $38 billion from $41 billion in FY09 due to the global economic slowdown.

The Euro crisis has hit engineering exports quite significantly in the period January to March this year. Exports to Europe declined to Euro 1914.16 million in FY09 from Euro 1956 million in the corresponding period of the previous fiscal.

The engineering industry is venturing out to places like Nizhny Novgorod and Novisibirsk in Russia. Nizhny Novogord, for instance, is mainly oriented towards transportation like the auto industry, shipbuilding, diesel engines, aircraft manufacture and machine tools with auto industry being the leading sector. “We are also looking at countries like Mexico, Brazil, Columbia in Latin America and South Africa, where we see good markets for our products.

An interesting thing that has happened is that Chinese exports have become less competitive due to currency parity. This augurs well for engineering exports,” said Mr Rakesh Shah, former chairman, Engineering Exports Promotion Council (EEPC) and managing director of Nipha Exports.

Apprehensive of the Euro zone debt crisis, exporters of engineering goods are also declining fresh orders from buyers in the European Union. “Many exporters, especially from the small and medium sector (comprising half of the total Indian exporters), are not taking fresh orders at current Euro rates. They fear the returns may be lesser. Also, buyers are unwilling to hike prices,” said an EEPC official.

Engineering exports account for about a fifth of India’s exports to the EU. Of this, 50-60 per cent of trade is in euro terms. The most hit are the transactions where European buyers are unwilling to do business in any other currency apart from the euro. Mr Shah said engineering exporters have stopped extending credit to European buyers due to the current high risk perception.

Engineering exporters favour long-term contracts as only such transactions make their business viable. Exporters are also watching the health of the banks in the EU. “We cannot bank any more with the smaller and lesser known European banks for letter-of-credit transactions,” Mr Shah said, adding that exporters are most comfortable only where there is a long-term relationship with buyers.

Source :- economictimes.indiatimes.com