In April expected to be more than March’s fall
Financial year 2020-21 (FY21) is expected to begin on a sombre note for India’s exports, which are expected to slide further in April after a record fall in March. A shortage of labour, liquidity, and key raw materials dogged even the few industrial units that managed to reopen after some restrictions were eased on April 20, exporters said.
In March, exports contracted by 34.5 per cent — the steepest monthly fall in at least 25 years — as overseas demand was lackluster because of the Covid-19 pandemic. In the following month, while few export sectors remained live, even those in the chemicals, and pharma sectors, that were allowed to function complained of logistical issues.
“Given that factories nationwide were shut for 20 days in April, as compared to only 5 days in March, there’s no doubt that April will see a 40-50 per cent decline in exports,” said Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO). With even processed petroleum exports taking a beating as international prices nosedived, outbound trade will crash, but a decline of more than 50 per cent will be a cause for concern, Sahai added.
Not running smoothly
In the crucial engineering goods sector, which accounted for a fourth of India’s $314 billion exports in FY20, labour shortage crippled the bicycle, fasteners and hand tools industries in Punjab, while Gujaratbased castings units suffered from lack of raw materials, according to
Hanging by a thread
Ravi Sehgal, chairman of Engineering Export Promotion Council. “As we had feared, major chunks of our foreign market share in key export destinations like the United States and Europe are under pressure from competing nations. On the face of it, Mexico and Brazil are gaining on Indian exports in North America, while products from Turkey and Egypt are creating pressure in European markets. But the real threat remains from Chinese suppliers, who have now resumed production and are undercutting prices,” Sehgal said.
The sector was badly hit by order cancellations, but with European nations opening up, a sudden demand for equipments for water, gas and power distribution is expected, which may allow for some recovery of lost ground. Industry representatives have informed the commerce and industry ministry that they want units to restart soon as most of the April- October peak season has already been lost.
With an even shorter business season, apparel and textile exports are witnessing significant turbulence. Major retailers like J Crew, Neimann Marcus and Aldo are filing for bankruptcy in the United States and vast shipments ordered by a clutch of related brands for the ongoing Spring-summer Season 2020 are languishing in shut warehouses.
“The industry has now turned to pushing out more raw materials to Vietnam and Thailand. But on the one hand, freighters have continued charging extremely high costs of shipping, on the other, a complete breakdown in movement across the overland crossing to Bangladesh has left more than 1,000 tonnes of cargo stranded,” said Siddhartha Rajagopal, executive director at the Cotton Textiles Export Promotion Council. Securing certificate of origin and digital signatures for documents has also become difficult, he added.
Elsewhere, the Apparel Export Promotion Council has requested the Commerce Department to push the issue of extension of packing credit and forward contract by 6 months without penal interest and waiver of penalty imposed on forward covers by some banks.