Despite export growth, exporters face uncertain times

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Bikky Khosla | 12 Jul, 2011
Despite robust growth of a whopping 46.6 percent in the country's exports in the month of June, a recent survey has indicated that this strong growth performance is not likely to be sustained in the months to come. Notably, the country's exports rose 46.4 percent in June at $29.2 billion compared to June 2010, taking the growth of the sector to $79 billion in the first quarter of the current fiscal.

However industry body, FICCI, is apprehensive of this growth. The survey conducted by the body concluded that the party is not going to last long. Considering the current high inflation and increased interest rates, I feel exporters are actually feeling the heat of the tight monetary situation which will be reflected in a couple of months from now.

With the end of interest subsidy scheme for exporters, and the likely end of the DEPB scheme in September, this will adversely affect the performance of the export sector. Add to it the rising cost of raw material and fuel.

While rise in input costs have put pressure on exporters to maintain their competitiveness in the global markets, rise in fuel prices have led to increase in transportation costs within the country and in international ocean freight rates. All these added together, I actually would not be rejoicing at the recent figures of the past months.

At one point of time, exporters will have to pass on the burden of increased production cost to the consumer. As such, this could lead to a drastic fall in orders from overseas markets.