Indian exporters with exposure to Spain, Portugal, Ireland, Italy and Greece (SPIIG) will now have to take larger risk cover from Export Credit Guarantee Corporation (ECGC) of India on the back of looming debt crisis in the European Union.
The export sectors that are likely to be impacted include organic chemicals, apparels, leather products, coffee and tea, cotton, iron, steel and footwear.
ECGC has recently changed the buyer underwriting policy for Spain, Portugal, Ireland, Italy and Greece (SPIIG) countries after which Indian exporters doing business in these markets will have to get wider cover for their exports owing to higher risk involved in doing business with these countries.
This has come after Export Credit Guarantee Corporation (ECGC) changed the country under-writing policy for Greece wherein the open cover facility is no longer available to exporters. Instead, it has become case-to-case and that too for maximum one year for all exports to Greece.
“We are closely monitoring our cover for all euro zone countries. Though no country has been downgraded, we are assessing the political and economic situation in Spain, Portugal, Ireland and Italy as well as analysing balance sheet of buyers in these countries so that Indian exporters do not lose money there. We’ve also asked for a wider risk coverage for exports to these countries,” a senior official of Export Credit Guarantee Corporation (ECGC) told Financial Chronicle.
Italy is a big market for ECGC with 4.3 per cent of its overall credit coverage going to this European country followed by France at 3.98 per cent, Spain at 2.38 per cent, Ireland at 0.4 per cent and Greece and Portugal at 0.3 per cent.
Recently, even S&P has downgraded the credit rating of nine European countries that include France, Austria, Italy, Spain, Cyprus, Portugal, Slovakia, Slovenia and Malta, sending a signal to Indian exporters to be more cautious.
“Europe’s share in India’s overall exports is declining because of the decline in working population. However, the recent downgrade of credit rating of some of these countries will force exporters to re-work on their strategy, as there could be serious payment issues from these countries,” Ajay Sahai, director general of the Federation of Indian Export Orgainsation (FIEO) added.
In terms of India’s exports, SPIIG countries constitute one-fourth of total merchandise exports to Europen Union at $8.25 billion in 2010-11.
Among key export items, organic chemicals and pharmaceuticals, readymade garments, iron and steel, machinery and mechanical appliances and electrical machinery and equipment have high (more than 30 per cent share in India’s export of an item) exposure to Europe.
Source : mydigitalfc.com