Explaining how global trade is slowing down and with the WTO revising its forecast for trade from 4.7% to 3% in April 2022, Ajay Sahai, DG & CEO, Federation of Indian Export Organisations (FIEO) said that this was bound to impact India’s export performance as well. “But demand for low-value products is increasing. Export value may not be the same as last year, but the volume is intact. We have been on a growth trajectory in the last five months compared to last year, even though the base of exports is coming down. We will inch towards $470 billion or more this fiscal,” he said while speaking at a conference organised by the industry body in the capital on Wednesday.
The contraction in global trade, he added, was also visible from the sharp decline in the freight rates, which have reduced by about 50% on major trade routes. The freight from Asia to North Europe and the US (West Coast) dropped from $14,000 to $4,000 and $8,000, respectively.
Talking about how inflation has been plaguing all economies, Sahai highlighted that inventories have been very high globally in all economies. “Purchasing power has dwindled, which has affected the offtake and hence demand is slowing,” he added.
Predicting how exports may pick up post October, Sahai mentioned that positive sentiments towards India and the high costs of manufacturing in China would translate to advantages for the Indian economy. “We have seen reactions from buyers in the USA and Japan. Buyers are moving away from China because of higher costs and lesser reliability due to their zero Covid tolerance policies. A lot of orders for low-value products, which were a virtual monopoly of China, are now coming to India,” he stated.
While export growth is to be supported by all sectors, Sahai mentioned certain areas would drive this growth faster. “On the agriculture front, we are doing well. Electronics is growing by 50% or so, though on a low base. We expect engineering exports to pick up as well. The recent decline has been due to the raw material. Export has come down with levy of export tariff, but the government is looking to review export tariff on steel items. We expect our traditional sectors to do well and think that by the end of December, we will have far better results,” he said.
Elaborating more on the Russia Ukraine war and its setback to exports in the short run, Sahai said that India is on track to increase its exports to Russia once the Rupee payment mechanism gets operationalised. “As per our research, if payment mechanisms are put in place and logistic issues are addressed, we can add $5 billion to Russia because demand is there for Indian products,” he said.
Affirming his views, FIEO President, A Sakthivel said that RBI has come out with a rupee trade mechanism. “Indian banks are ready. The State Bank of India is equipped to do rupee business with Russia, but they have to identify one Russian bank. The Commerce Secretary said that the Russian government will identify a bank and the rupee trade with Russia is expected to happen soon,” he said.
FIEO also emphasised raising the bar on services exports in the current fiscal in order to cushion ourselves both on trade deficit and current account deficit.
Rooting for ecommerce retail exports, which has a potential of 10x multiplier in 3 years, FIEO said that it needs to be encouraged by addressing various regulatory issues and providing them at least the same benefits which are available to the merchandise sector. “We would like the new Foreign Trade Policy (FTP) to recognise the potential of the sector which can be a game changer to show results in a very short time for some of the Government initiatives like GI products or One District One Product,” the industry body highlighted in its press note.
Delving more on the FTP, which is expected by the end of the month, FIEO stated it is expected to provide a roadmap for reaching $1 trillion each in goods as well as services exports by 2030. “This would require new entrepreneurs, start-ups in exports and re-orientation of domestic companies, including MSMEs, towards exports. We also expect a lack of trained manpower in the exim segment, as a constraint, to take us towards such an ambitious but achievable target. To only focus on the skill requirement of the foreign Trade, a Foreign Trade Sector Skill Development Council may be set up,” the apex exports organisation added.
Exports in August declined by 1.62% to $33.92 billion while imports rose by 37.28% to $61.68 billion.
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