Others

Others

Despite both the Economic Survey 2019 , and NDA-II’s first Budget, clearly establishing the importance of India’s exports in propelling India reach its ambitious $5 trillion economy mark by 2022, the latest trade number relating to country’s outward shipments show a-not-so-reassuring picture.For the first time in nine months, India's exports shrank 9.71% last month to $25.01 billion, while imports declined 9.06% to $40.29 billion.The latest numbers pertaining to the country’s exports in key sectors indicate a sluggish demand for made- in-India items globally. Among the major foreign exchange earners that witnessed one of the steepest fall in export growth, included: Petroleum (-32.85%), Rice (-28.05%), Gems and Jewellery (-10.67%), ready-made garments (-9.18%), engineering goods (-2.65%), revealed the data released by the Commerce and Industry Ministry.Only 9 out of the 30 major product groups were found to be in positive territory, including some plantation and agri sector, iron ore, ceramic products & glassware, drugs & pharma, electronic goods and jute manufacturing, observed Federation of Indian Export Organisations ( FIEO ).The industry body further stated that barring these 9 major product categories, all major sectors of exports, including almost all labour-intensive sector exports, besides petroleum for the first time in recent times, were in the negative with a decelerating trend.Commenting on a 41-month low degrowth in exports, FIEO president Sharad Kumar Saraf, said, "Sliding merchandise exports growth during June is a reflection of sluggish global demand and rising tariff war. The high exports base of June 2018 contributed in no less measure. The softening of crude and steel prices also pulled down exports".Further, citing US-China Trade war and developments in Iran as one key reason contributing to the existing woes of a global economy, the FIEO Chief maintains that the uncertainty attached to it [Iran-US slugfest] will further affect the flow of investment and add to currency volatility across global markets.With key exports sectors faring poorly and no immediate respite in sight, the crucial question cropping up here is where is the spillover benefit of the ongoing US-China trade tussle where exporters were hoping for a steep jump in the global demand for their items. Also, worth probing is what might have gone wrong with Indian exporters and are there structural weaknesses that prevent Indian exports from being competitive?Satish Wagh, Chairman, Chemexcil , whose segment saw a dip of 8.17%, maintains that the USA’s withdrawal of GSP benefits on exports from India, does reduce the competitiveness of Indian exporters. He, however, adds that apart from duties, there are factors such as quality, delivery time, etc., which impact trade order flow. “In the coming times, it will have to be seen how this trade war shapes up”, says Wagh. He adds that there certainly exists a general perception that due to the ongoing US-China trade war, Indian suppliers will benefit and the government is also actively engaging with Indian exporters to take advantage of the situation and soon positive results will start showing up.According to HKL Magu, Chairman of the Apparel Export Promotion Council (AEPC), the apparel sector did not see any significant dip this time. However, any decline in allied sectors such as cotton yarn etc, is not due to recent India-US trade skirmishes, but mainly due to non-competitiveness of Indian players.The main reason for the decline in the latest export numbers is the fact that Indian exporters are not cost-competitive enough to encash on the opportunity arising out of the US-China trade war, feels Magu.“Although China, hit hard by the trade war, has so far vacated a significant space in the apparel domain, we are not able to capitalise on the opportunity and competitors such as Bangladesh, Cambodia and Vietnam are able to better capitalise on the new opportunities created, both due to preferred trade agreements they have, and conducive policy frameworks in place,” he reasons.Flagging that the earlier announced duty drawback mechanism of the government needs to be reinstated efficiently, Magu highlights that post-GST implementation, apparel exporters are at a loss of 3-4% [of incentives benefits] since drawbacks and ROSL that the sector used to get at around 9-10%, has now been reduced to 3%, turning Indian items non-competitive at global marketplaces.To address the decline in trade, the AEPC Chief opines that India must have more Free Trade Agreements (FTA), not just with the US, but also with the EU - just as Vietnam and Bangladesh have.Among the worst-hit segments that registered a decline in export numbers is the country’s cotton yarn/fabrics/ made-up segment. The sector, covering items such as bed linen sheets, etc., witnessed a dip of 19.73%. KK Lalpuria, executive director and CEO, Indocount industries, blames the high input raw material cost for this dip. "As a raw material, the cotton turned expensive in recent times, and manufacturers eventually bought it a high price, but then the yarn prices nosedived, so there arose a disparity that negatively affected the exports of Indian items in this segment,” asserts Lalpuria, mentioning that a better trade framework employed by competing countries such as Vietnam, Bangladesh and Cambodia have also led to a fall in Indian shipments this time.“Recently, inputs cost in raw material across segments have increased. Further, be it the power or labour costs, everything seems to have gone up. As a remedy, many of the sector-specific financial incentives schemes, thus, need to be executed and streamlined on an urgent basis,” says the representative of the textile brand, ranked among the top three exporters of bed sheets/ made-ups from India.To meet WTO norms, the PM -Modi led NDA-II, right from its first term days, has been contemplating phasing out many of its export subsidy programmes.Many such schemes have so far provided the much useful cushion to a large section of Indian exporters that looked at the government for any kind of financial support to enhance their market competitiveness globally. However, in recent times, the US government has challenged India’s export subsidy programmes at the World Trade Organization (WTO). Keeping this into account, the Indian government plans to phase out its flagship Merchandise Exports from India Scheme (MEIS) over the next 2-3 years. Working in this direction, a scheme for the remission of state and central levies has already been implemented in garments and made-up exports.While the government says that currently, its potential revenue foregone on account of MEIS is projected to be at Rs 30,810 crore a year, has the government's move led to the intended results on the ground, Indocount’s Lalpuria seems to differ.On the deployment of funds in Amended Technology Upgradation Fund Scheme (ATUFFs) - a scheme, specially designed for the sector, he says, “Out of more than 9000 cases, the financial support for only 150 cases have so far been considered in the last 3.5 years.”It’s noteworthy that the government launched a Special Package of Rs 6,000 crore in 2016 for garments and made-ups sectors. The package extends Rebate of State Levies (RoSL), additional incentives under ATUFS and a relaxation of Section 80JJAA of Income Tax Act.“RoSL refund of state levies and refunds of State and Central Levies is still pending since last November,'' Lalpuria rues, underlining that global trade is a game of quick decision making that calls for being ahead of the competition in terms of financial planning. However, with such policy glitches affecting cash flow cycle, many exporters in textile segment, being merchant exporters find it acutely hard to sustain the global competition.“Government needs to reward honest exporters with enhanced ease of business, encompassing every trading process, right from simplifying bureaucratic norms to easing inspection procedures, and from taxation glitches to the hassle-free customs,” sums up Lalpuria.