FY21 exports may fall by 10% if there's no second corona wave: FIEO
India's exports are expected to contract by 10 per cent in 2020-21 with the devastating impact of the coronavirus pandemic slowly receding, and June exports expected to shrink by only 12 per cent, and a huge improvement from May's high 36 per cent, the Federation of Indian Export Organisations (FIEO) has said.
However, this calculation also runs the risk of sliding deeper into red if the government pursues a blanket ban on imports from China, FIEO warned at a press conference on Thursday. It reiterated that customs authorities at several ports have ordered sudden examination of Chinese consignments without any official word from the government.
"We need to take a calibrated approach to banning imports from China, as our industry is more dependent on industrial inputs from China than any other nation. Instead of reacting hastily, we have instead suggested to the Directorate General of Foreign Trade that export of raw materials to China be tightened and a cess can be considered," said FIEO President Sharad Kumar Saraf. He flagged the issue of lost revenue by pointing to cotton exports to China that is made into higher value garments as well as shipments of Indian spice that is sold at a profit by China.
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On the other hand, the industry body has also asked the Commerce Department to scrutinise imports from Honk Kong, which was the country's sixth largest import partner in the previous year with $15.68 billion, a steep rise from its number 13 spot in FY18. This happened even as India managed to reduce imports from China for the second year running, to $ 62.3 billion. FIEO said it is evident that mobile phone imports worth $ 7 billion was routed through the special administrative region by Chinese firms.
Domestic industry has suggested the government trash plans to raise tariffs on Chinese imports, in favour of more such non-tariff barriers, which Indian goods face in other nations. But FIEO also remains fearful that China may retaliate with its own set of restrictions on Indian shipments to China with Saraf saying exporters were worried that they would ultimately have to pay up more or face lack of materials.
"China's exports to India constitute 2.8 per cent of their exports. But India's exports to China is 5.4 per cent of our total exports," FIEO Director General Ajay Sahai said, arguing India's larger trade exposure to China needs to be considered before unilateral moves by New Delhi.
Trade deals needed
With orders have started flowing in, exporters are seeing orders which had been cancelled earlier being reinstated. Case in point, the garment sector has received orders from buyers who hitherto sourced from China, Saraf said.
To boost exports in the short to medium term, he said India should reach out to nations with rising anti-China sentiments such as the European Union, United States, Australia, New Zealand, Canada and Japan, positioning Indian goods as an alternate.
As a result, FIEO has also strongly batted for India restarting bilateral talks with various nations to ink Free Trade Agreements (FTA). "We need to join atleast some trading blocs to get tariff benefits, which are being taken away by competing nations. Vietnam's recent FTA with EU will give it a solid advantage over Indian exporters since they will get access to a huge market at much lower tariffs," Saraf said. He added that decision to breakaway from the Regional Comprehensive Economic Partnership (RCEP) also be re-assessed. Vietnam is a direct competitor for engineering goods, leather articles, marine products and furnitures in the EU.
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Despite the nationwide lockdown, pharmaceutical and processed food exports have continued to do well. As of June, good growth is also expected in agricultural commodities, plastics and chemicals. Experts say receipts from petroleum exports will also rise.
Saraf said every district can be made into an exporting one with support of state government and the district collector. He added that the Collector's performance should also be based on how much investment he brings in and exports he facilitates. "In China, in almost all cities, local authorities visit factories once a year and solve problems then and there. We need the same here as well,"
Need export incentives more than ever: FIEO
Days after Commerce and Industry Minister said he was not in favour of giving subsidies to exporters, FIEO again stressed its demand for additional MEIS benefits of 2 per cent, with 4 per cent more for labour-intensive sectors. It has also pushed for allowing roll over of forward cover without interest and penalty and automatic enhancement of limit by 25 per cent. However, Goyal has said "handouts" for exports have led to Indian industry remaining dependent on support.
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