Export orders to plummet after March.

Exporters say orders for the first few months of the next fiscal have almost halved.

Merchandise exporters claim that their order books for the next financial year look dismal as economic recession in many target markets have made buyers postpone purchases.

If the situation continues, it will lead to a drastic reduction in production and layoffs, starting with temporary staff, they say. Industry representatives from engineering, textiles, handicrafts, and gems and jewellery — which make up more than 40 per cent of India’s overseas sales — say they have either half the orders for months after March 2009 or none at all.

Shipments will be low even in the remaining 75 days of the current financial year, they say, adding that this will be reflected in marginal growth or even a dip in exports.

“At present, export orders are down 20 per cent on an average. It takes about three months to execute an order. So export growth will continue to remain muted for the remaining months of 2008-09. For months after March, orders could become lower,” said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO), a lobby group supported by the government.

Exports dipped for two consecutive months ending November 2008 as demand from recession-hit markets in the United States and Europe dwindled after September. While it is almost certain that India will miss the $200-billion export target for 2008-09, it is expected that cumulative exports during the current financial year could at most touch $175 billion, as against $162 billion in the year ended March 2008. 

Exporters belonging to the engineering goods sector say post-March 2009 orders are down 50 per cent compared with the previous year.

“The challenge is to manage production schedules with such low level of orders. The options are single shifts and layoff of casual labourers,” said Rakesh Shah, who heads a task force set up by the Engineering Export Promotion Council to tackle the current economic slowdown.

The order book of Shah’s Kolkata-based agriculture machinery firm, The Nipha Group, has half the orders after March compared with the same period in the previous year.

Significantly, the engineering sector contributed about 22 per cent to India’s merchandise exports and was one of the main drivers of export growth.

In the engineering goods segment, auto exports are likely to be one of the worst performers. Hyundai Motor India Ltd (HMIL), the number one exporter of cars by volumes, has orders for 24,000 four-wheelers in the three months ending March 2009, which is half the orders in the same period last year. The company expects this to worsen after March.

“I’m concerned at the low export orders we have so far for the next year. Since we contribute over 90 per cent of the total volume of passenger vehicles exported from India, we need help from the government,” said HS Lheem, managing director & chief executive officer of HMIL. Maruti Suzuki, the domestic market leader, is also reported to have received lesser-than-expected orders for its newly launched A Star, while TVS has downgraded its export growth in 2009-10 by half to 10 per cent.

Orders for textile items after March have also plummeted to the levels seen by the engineering sector.

“The sector would have collapsed if Chinese textile exporters were not facing a bigger problem than us. But most textile exporters are yet to receive orders after March. In 2008-09, we expect a dip of 5 per cent in Indian textile exports, with yarn and garments being the worst effected,” said D K Nair, secretary general of Confederation of Indian Textile Industry (CITI). Textiles account for nearly one-tenth of Indian exports.

According to Sudhir Dhingra, chairman and managing director of garments exporting firm Orient Craft, overseas buyers are holding on to their orders at the moment. “Going by the business cycle of the sector, things will be more clear in the 15 days up to February 15 for orders that will have to be produced in the April-May period,” he said.

Orders for gems and jewellery exports, which contribute nearly 10 per cent to Indian exports, have also dipped. “There are no bulk orders from big retailers. We get orders based on quarterly requirements now, and they have halved. With the Christmas season ending, we were expecting that there would be some requirement from overseas markets. Moreover, Valentine’s Day and the Chinese new year may lead to some demand,” said Vasant Mehta, chairman of the Gems and Jewellery Export Promotion Council.