India’s exports can bounce back on graded lockdown exit, phased resumption of manufacturing activities, says EEPC Chairman

Indian engineering exports can “witness a bounce-back” if a “graded-exit” to the lockdown and a phase-wise resumption of manufacturing activities take place.

Quicker resumption of economic/manufacturing activities will also help “garner confidence in international quarters” about India’s resilience, according to Ravi Sehgal, Chairman, EEPC.

Indian exports already had a challenging 2019-20 with protectionist measures coming into effect across major markets like the US and Europe; a trade war between China and the US; and an overall slowdown in economic activity across select geographies. The coronavirus outbreak was the last thing to hit exporters.

According to him, normalcy in transportation, working out labour shortages and ensuring liquidity for manufacturing units are the immediate challenges.

India’s lockdown has now entered its second phase with attempts being made by the Centre and the State governments towards resumption of economic activity while maintaining safety protocols.

“International queries are coming in already. In this backdrop, if there is some resumption of economic activities, then India’s international image gets a boost. This will also boost confidence in the international community (about the country’s resilience),” Sehgal told BusinessLine, during an interview.

Essential services in Europe, the US and the West Asia continue to operate. The spares used in such essential service operations are primarily exported from India. “If we lose out on orders now, other countries like Brazil or Turkey could gain,” Sehgal explained.

EEPC recently undertook a market sanitisation drive in Kolkata, following a request by the West Bengal Chief Minister.

Consignments stuck

India’s engineering exports stood at $81 billion in FY19, and at $76.3 billion in FY20. The pick-up in demand witnessed towards the last quarter of this fiscal was hit with orders being stuck because of the lockdown.

Another $4 billion worth of goods is held up across State borders with the lockdown coming into effect at State levels early to mid-March). The movement of consignments in March was stalled and some of the nations delayed placing orders, in view of the Covid-19 pandemic.

At present, India is receiving only 20 per cent of its normal orders. Against an approximate $4-5 billion worth of monthly orders, present ones are hovering at around $1 billion, or a little more.

There is also a probability that if resumption happens now there is a chance of reaching 50 -60 per cent operational levels by May-June. A very optimistic outlook, by market sources, is that there could be 70 per cent recovery in turnover by the end of this year, if economic activities resume.

He added that by May first week, production is likely to resume across units (in green zones).

Liquidity crunch

Another burning issue is the immediate liquidity crunch that MSMEs face. Fixed costs like electricity charges and other expenses continue to recur. Staff salaries also need to be paid. Refunds also have to speed up.

“Moratoriums and delayed payments on loans are helpful. But the cash crunch is at a working capital level for MSMEs. Something should be done at that end too,” he said, adding that suggestions range from refund or remission of duties and taxes to availability of steel at “export prices”. These could help boost cash availability.

This apart, all eyes are now set on the probable economic relief that the Centre may announce.