Namrata Kath Hazarika | 18 May, 2009
In an exclusive interview Ajay Sahai, Director General, Federation of Indian Export Organization (FIEO) told SME Times that SMEs' export market is the worst hit due to global slowdown.

Excerpts of the interview...

What is the current status of the export market?
Ajay Sahai: India’s exports declined a record 33.3 percent in March 2009. Currently, the export figures are showing a negative growth. It is not only in India but most parts of the world are facing the same problem due to global slowdown. India is not affected to that extent as compared to other countries.

The Asian Development Bank Report forecast said that in 2009 Asian exports will decline by 77 billion and Indian exports will decline by 3.4 billion. Now if you look at January, February, March and April figures, we have already declined by more than 20 billion. It means we have to compensate by 17 biilion in the next eight months. Therefore indications are that from May or at least from July, we will start seeing positive growth in exports. In the month of May exports will be still negative but we are confident that from July onwards we will have positive growth in exports.

Exports contract for the sixth consecutive month to $11.5 billion. India's exports declined a record 33.3 percent in March 2009, as the continued global economic recession affected demand for goods shipped from India. How is this impacting SMEs as a whole?
Ajay Sahai: SMEs export segment is the worst hit because they are more in the traditional sectors of exports. Look at textile: more than 90 percent of exports are contributed by SMEs. So, is the case with leather and handicraft and cottage sectors. About 95 percent of manufacturing is in the SME sector and the rest 5 percent is contributed by large enterprises. Now if exports are affected, it is the SME sector which have been affected. In the last six months exports declined on average basis of around 30 percent. If you are talking about September to March or October to April the overall decline is 30 to 33 percent, but for SMEs it has been a decline for about 40 percent.

What is the position in terms of demand in the new markets like Latin America, Africa and Asia?
Ajay Sahai: Demand is coming from Latin America, Africa, and Middle-East. Right now if you look at these countries except Middle-East, rest of the countries such as Latin American countries will be 4 percent and African countries will be 7 percent of the exports.

In 2007-08 our exports to US accounted to 13 percent of the total exports. But in 2008-09 it has come down to 12 percent. In the last six months it has come down to 11.20 percent. So, exports have constantly declined. However, these are compensated by two new markets that is Latin America and Africa which will help to shift the country's exports. Secondly, we are not sure whether we will be exporting our traditional products in proportion or not.

As I am talking about total exports, individual sectors may still not perform well such as textile, handicrafts, gems & jewelry (excluding gold jewelry) and leather. In 2008-09, 1.4 percent was the growth because gold jewelry exports have gone up by 26 percent.

According to ASSOCHAM, SMEs' share in the country's exports would increase from 40 percent to over 44 percent see in the next five years and SMEs' contribution to GDP is projected to go up to 22 percent by 2012 from 17 percent currently? Do you think it is realistic?
Ajay Sahai: I don't know what database they have used for such predictions. But one thing is clear that we have better flexibility to adopt to the changing conditions which will not be possible for the big companies because they have lots of overheads. Small scale industries are in better position to change to this conditions. Looking at the new internal form of manufacturing, we will definitely increase our share so far as SMEs are concerned.

India's industrial output fell for the third consecutive month in March by a steep 2.3 percent compared to the corresponding month last year, according to government data. Your take on this?
Ajay Sahai: Industrial output has fallen because the exports contributes 20 percent of the GDP. If exports are not doing well then lots of imports are not coming into the country.

What are your expectations from the early quarters of 2009-10?
Ajay Sahai: Up till June the negative trend will continue but from July onwards the situation will definitely improve. In the month of June we will not see even two digit positive growth. However, if from 35 percent negative growth the country sees a 5 percent positive growth it will be big achievement for the industry. July, August or September we will see signal digit positive growth but from October onwards double digit growth is expected.