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Exports would miss the $300-billion target for 2011-12 by at least $20 billion due to softening commodity prices, demand fall abroad, the Euro zone crisis and strengthening rupee, according to the Federation of Indian Export Organisations.
“Exports would touch a maximum of $280 billion for this fiscal and then grow at a conservative estimate of 12-15 per cent to $315-320 billion in 2012-13,” Mr M. Rafeeque Ahmed, who recently took over as the FIEO President, told reporters on Monday.
He also said achieving the $500-billion export target for 2013-14 (set by the Commerce Ministry) is a “tall order”. Citing World Bank and IMF forecast, he said 2012 seems to be a “difficult year”.
China's strategy
However, on a positive note regarding the opportunities ahead, he said China’s reported strategy to abandon its export-led growth and instead focus on its domestic market as well as the increasing wages there would mean that many export-oriented companies in China would relocate to countries such as India.
On the reasons for a fall in India’s export growth, Mr Ahmed said that in 2010, a 26 per cent rise in commodity prices helped India’s exports, but now commodity prices -- particularly of metals are softening -- and this would in turn reduce the export value of end products.
Euro zone crisis
“Tightening of belt in the Euro zone is in the offing and it will have its effect on world trade. With the cooling of commodity and metal prices as well as lowering of demand, many African and Latin American countries (to where India’s exports have been increasing) will face major challenges in meeting the burgeoning trade deficits and this may affect our exports to those regions,” Mr Ahmed said.
Besides, the exchange rate advantage available in the recent past would no longer be there due to the strengthening of the rupee against the dollar, he said.
The manufacturing slowdown will also impact exports as the share of capital intensive products in India’s exports have more than doubled to touch 54 per cent in 2010, while the share of labour intensive products fell from 30 per cent to 15 per cent, he added.
“Since GDP growth is likely to moderate (including the grim outlook on the manufacturing sector), the same will have its repercussion on exports,” Mr Ahmed said.
Credit cost
Referring to the high credit cost, he said the Government must extend its interest subsidy beyond March 31, 2012, for all export sectors to help competitively price the export items. Currently, the interest subvention is available till March 2012 only for handicrafts, handlooms, carpet and manufacturers in the small and medium sector.
Pointing out that sops such as the zero duty Export Promotion Capital Goods scheme and the status holder incentive scheme are available only till March 31, 2012, he said these should be extended till March 31, 2014.
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