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Global woes may derail export growth soon
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Bikky Khosla | 25 Oct, 2011
In the last few months, Indian exports have sidestepped the global downs to a significant extent. $23.8 billion in April, $25.9 billion in May, $29.2 billion in June, $29.3 billion in July, $24.3 billion in August, and $24.8 billion in September - these export figures are great news; however, the last two-month trade data signals to a declining trend, which is quite expected considering the ongoing economic turmoil in Europe and the US.
Interestingly, China is witnessing a similar trend in exports. In September, its export growth plummeted to 7-month low of 7.1 percent to $169.6 billion. In the previous months of August and July, exports stood at $173.31 billion (24.5 percent y-o-y growth) and $175.1 billion (20.4 percent y-o-y growth), respectively. It seems that the Chinese export sector is also heading for a gradual slowdown.
Exporters' body FIEO is of the view that further decline in export growth is likely in third and fourth quarters. Last week, Finance Minister Pranab Mukherjee also admitted that the economic crisis in Europe and the slowdown in the US were concerning. In addition, I feel that the global reach of the economic turmoil is also underlined by a number of recent industry surveys showing drain in confidence, and a 14 percent decline in September engineering exports, the largest contributor to India's export basket in 2010-11.
So, our exporters indeed have every reason to feel pessimistic. A few exceptions are the recently announced benefits for the export sector in the annual supplement to the 2009-14 Foreign Trade Policy. The decision to avail 2 percent interest subsidy on Rupee export credit to SME, handicraft, handloom and carpet sectors also assumes significance in view of compressed global demand.
I think the aforesaid measures will certainly help absorb the negative effects of the global economic turmoil to some extent. But at the same time, I am of the opinion that the government needs to take some immediate steps in terms of tax reforms and export transaction costs in order to enhance the competitiveness of the export sector.
The rising cost of credit has also been of lingering concern over a long period of time. Today, the RBI has hiked key interest rates again - the 13th hike since March 2010. This move will certainly fuel troubles further. I think there is an urgent need for better coordination between monetary and fiscal policies to ensure that the industry gets rid of the two pronged attack of high inflation and costly credit.
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Global economic scenario and declining Indian exports
anilsharma@nathgroup.com | Mon Oct 31 07:04:51 2011
Declining trends are stunning and eye opener . I agree with you that global economic turmoil and slowdown on one hand and non supportive decisions of Govt . like withdrawal of DEPB scheme and costly credit are further going to affect Indian Exporters more adversely in the days to come .I think that Govt. should take remedial steps to bail out the exports in coordination with industry and FIEO .
Industry and export scenario from financial perspective
Rajendra Bhujbal | Fri Oct 28 06:13:44 2011
As rightly said, hike of interest rate by RBI is going to have adverse impact for industries as they are already reeling under pressure of high inflation and now coupled with expensive credit.
Exporters will have worrying time because of European financial crisis and the US slowdown.
But instead of being cynical about the environment, we should hope for better like tax reforms which are expected by next April. This already shows some light at the end of tunnel.
Cheers!
People will still buy
allan_dsouzarediffmail.com | Thu Oct 27 15:35:10 2011
I know from personal experience that when markets are down people will still buy from a friend. When the purchase budget is tight people will still buy from a friend. They may not contact you but you must contact them. Being in regular touch elicits market feed-back and gives you early hints to diversify, amend, redesign your product.
RBI rate hike
Vijay | Thu Oct 27 06:17:05 2011
The sops given to industry are ok - they are using citizens' money and taking credit for the 'move to help' industry. Interest rate and inflation are high - again they are also a burden on common men. I think industrialists and exporters are far richer than us - the common men. So the State is running made after global safeguard and competition paying less attention to our poverty, hunger, income.
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