Merchandise exporters to tap domestic market .

Indian merchandise exporters are now looking inward at the domestic markets to make up for lower demand from traditional markets in EU and US that resulted in huge under-utilized capacities across sectors. Big export houses dealing in textiles, home furnishing, leather and handicrafts are facing problems of idle capacity ranging from 20-50 per cent after recession in major developed economies over the last two years.

With barely any hope of significant rebound in these markets anytime now, exporters are now considering to tap the huge potential that lies in India besides diversifying into other markets in Africa and Latin America.

“Big export houses have up to 50 per cent of their capacities lying unutilised because of slowdown in demand from EU and US besides huge inventories that some of them hold. Hence, it makes business sense to tap the immense potential that lies in the domestic market where people have higher purchasing power and are now willing to pay for export quality products of international standards,” Vivek Vikas, chief executive officer of Vijay Enterprises (India) told Financial Chronicle.

According to Vikas, who is heading the Noida-based star export house that manufactures lifestyle products, knitted and woven garments, fashion accessories and soft furnishing, the company has the capacity to produce goods worth Rs 20 crore each year. However, because of lower demand from overseas, the present output is just Rs 6 crore.

The clear shift is evident from the fact that for the first time export promotion council for handicrafts (EPCH) has opened its upcoming Home Expo India trade show for domestic retailers who will now be able to source products of quality compliant international trend from nearly 600 exhibitors. “The Indian exporting community, of late, has understood that the opportunities for retail marketing is much larger than exports because of less hassles involved in investments, logistics and inputs as compared to international market. Besides, documentation is easier and payments are faster,” Rakesh Kumar, executive director of EPCH said.

Indian leather exporters that are also struggling to keep their cost low in order to remain competitive are also pushing their products in the domestic market though the success rate is less due to growing demand for branded footwear. EU alone accounted for 65.48 per cent of Indian leather exports in 2010-11. “There has been 15-20 per cent increase in overhead cost over the last one year because of an average 20 per cent under-utilised capacity across leather sector. Players are now looking at increasing production and supplying some part of it in the domestic market to keep the price under control,” Rafeeque Ahmed, chairman of Farida Group said. However, Ahmed, who is also the president of the Federation of Indian Export Organisation, feels that the process of looking inward is not easy for leather goods manufacturers as there is an increasing demand for branded footwear and India is yet to take a lead in that segment.

Source : mydigitalfc.com