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There is an upside to the falling rupee. Exports are up thanks to that and more orders from the US and the EU. But the party poopers could be the rising input costs and a fall in demand from Latin America, Asia and Africa.
The Commerce Ministry’s disaggregated export data for the first quarter of this fiscal reveal a small increase in dispatches to the US and the EU that account for a third of exports. However, exports to Latin America, and parts of Asia and Africa, that together also account for a third of the total orders, fell.
India’s exports grew 11.64-per cent in July after dipping for two months; the disaggregated numbers for the month becomes available only with a lag. Overall exports during the first quarter fell 1.64 per cent.
“Orders are certainly going up, especially from the EU and the US. But the bounce back in exports has been affected by a fall in demand in other important markets in Asia, North Africa, East Africa and Latin America,” a Commerce Ministry official told Business Line .
While six of India’s top 10 export items such as textiles and garments, drugs and pharmaceuticals and petroleum products posted a growth in the first quarter, other important sectors such as engineering goods, gems and jewellery and electronics, continued to fall. Engineering export, which was a top performer less than two years ago, has taken a hit due to a fall in demand from Africa. “Orders from Africa are now mostly going to China that offers credit for a much longer period and at lower rates than we do,” pointed out Anupam Shah from the Engineering Export Promotion Council.
Rising prices
Availability of high quality steel, too, is affecting the sector as international steel production has been stagnant and prices have been rising.
Apart from steel, rising prices of other inputs such as petroleum and chemicals will also affect exports, says Ajay Sahai from the Federation of Indian Export Organisations.
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