FIEO warns of lay-offs

Says export volumes likely to drop in coming months, to affect CAD

Exporters have cautioned the government about lay-offs due to continuous contraction in merchandise exports. They said the decline in the outbound shipments would have an effect even on the current account deficit (CAD) that might derail the economy and asked the government to deliberate with them on the ways to address the issue.

S C Ralhan, president of Federation of Indian Export Organisations (FIEO), said based on the order-booking position in the exports sector, exports might significantly decline in volume terms in the months to come, which will result in lay-off of workers.

"It would be a big setback for the country which has kept employment creation its top priority and aims to create 10 million jobs every year," he said.

In value terms in dollars, the country's merchandise exports declined for the sixth consecutive month in May. If exports continue to move in the negative territory, it will put pressure on CAD and derail the rebuilding of economy as forex reserves may not be able to provide the required cushion.

"The government should, therefore, immediately initiate dialogue with the industry to understand the challenges and revisit its strategy to support the exports sector as consecutive six months' decline in exports indicate that current support level for exports is not enough," said Ralhan. He agreed with Reserve Bank of India Governor Raghuram Rajan's view that the global economy reflects signs of the Great Depression of 1930s. The RBI governor had last week said the global economy was slowly slipping into the problems reminiscent of the Great Depression and that central banks across the world should define "the rules of the game" to find a solution.