India's exports, which started to look up after the 2008 global crisis, are again troubled because of the problems in Europe and the slowdown in the US. The two regions together take in nearly 40 per cent of India’s exports. India, which was cruising along towards $300 billion is exports in 2011-12, is likely to miss the target.
With just two months left in the financial year, it is unlikely exports will go beyond $280 billion, according to exporters and export promoters. The 2013-14 target of $500 billion also seems difficult. Engineering and apparel exports in particular have been badly affected.
“Reaching $500 billion in two years needs a compounded annual growth rate of over 29 per cent, which is a difficult task, considering that the euro zone crisis will take time to resolve. The impact has been seen in the past four months; very little improvement is expected going forward,” Rafeeque Ahmed, the newly-elected president of the Federation of India Export Organisations, told media.
The commerce ministry had earlier said a 25-30 per cent compounded annual growth was required to achieve $500 billion in 2013-14.
This meant exports of $300 billion in 2011-12, between $375 billion and $400 billion in 2012-13, and $500 billion in 2013-14. Now the government says it can at best achieve $360 billion in 2012-13; Fieo feels even this is ambitious and the final tally won’t be more than $325 billion.
“The world economy has become so erratic that one cannot predict. The engineering export target this year is $72 billion but will be $60 billion (when the year closes), the $500 billion target for 2013-14 will be an uphill task,” Aman Chadha, chairman of the Engineering Export Promotion Council, said.
Engineering exports dropped by 0.92 per cent in September, 6.66 per cent in October, 38.4 per cent in November and 31.1 per cent in December.
Even apparel exports have slowed and are unlikely to meet the $14 billion target this year. “The situation in Europe, which buys 55 per cent of our apparel exports, is going from bad to worse,” HKL Magu, vice-chairman of the Apparel Export Promotion Council, added.
Apparel accounts for 6 per cent of India’s merchandise exports; this ratio means $30 billion of the targeted $500 billion in 2013-14. But this will be more than the double the $12.6-13 billion the council hopes for this year. Sumeet Keshavan, financial controller of Gokuldas Exports, declined to comment.
Car exports too have slowed with Hyundai, the biggest exporter, registering just 5 per growth in exports between April and December; Maruti actually saw a drop of 17 per cent in car exports. “Europe is not doing too well but other non-European markets are doing much better. Overall, we expect exports to be flat this year, with our share in Europe coming down,” Shashank Srivastava, Maruti chief general manager of marketing, said. Europe’s share in Maruti’s export has come down from 80 per cent in 2010-11 to 35 per cent now. The company exported 147,575 cars in 2010-11. But the figure decreased by 17 per cent to 88,469 cars till December mainly due to Europe’s problems.
But the silver lining is that gem and jewellery, the third largest export product group, may not see any impact. “Europe is a very insignificant market, constituting less than 10 per cent of India’s exports of gems and jewellery. Any slowdown in Europe is unlikely to impact our exports and we hope to meet our target for this year,” Mehul Choksi, managing director of Gitanjali Gems, said.
Even the slowdown in manufacturing will have an impact, as the share of capital-intensive products had doubled to 54 per cent in 2010 when the share of labour -intensive goods was halved to 15 per cent. “Besides, the exchange advantage available to exporters in the past will no longer be there with the rupee gaining strength against the dollar,” said Ahmed.
Fieo will meet the finance minister on Tuesday to apprise him of challenges, the major ones being the high cost of credit, ranging between 11.5 and 13.5 per cent, when international rates are just 4 to 5 per cent. Some steps may be needed in the budget to arrest the slide.
“Besides, the centre must introduce GST… so that transaction costs come down. This will increase the competitiveness of Indian exports. There is also a need to extend interest subvention to all export items beyond March,” Ahmed added. Interest subvention is now given on handicrafts, handlooms, carpets and manufacturers in small and medium enterprises.
There is no direct correlation between world trade and India’s goods exports. But Indian exports have been in line with global demand in the past. For instance, world trade grew by 15 per cent in 2008 when India’s exports grew by 30 per cent. In 2009, when the world trade contracted by 22 per cent, Indian exports also declined by 15 per cent. In 2010 world trade rebounded by 22 per cent growth and India's exports surged by 31 per cent.
However, the World Bank has already revised its volume-wise growth of world trade downwards for 2012 to around 4.4 per cent, while the International Monetary Fund has projected just 4 per cent growth.
Source : mydigitalfc.com