Textiles, jewellery report sharp fall in exports

Exporters fear 10 million job losses.

Labour-intensive sectors like textiles and jewellery have registered a sharp fall in exports in December 2008, leading to concerns about large-scale retrenchment in these industries, a senior government official said.

According to initial estimates available with the commerce ministry, these sectors, which constitute a third of India’s export basket, have posted a dip of 18-54 per cent in December 2008.

Exporters claim they do not have orders beyond January 2009, adding that the situation could lead to 10 million job losses if things did not improve. Industry lobby groups have been projecting widespread job losses, but an independent estimate of the extent of retrenchment is not available as there is no monthly or quarterly employment survey in India.

Exports in December last year have been estimated at $11.8 billion, representing a dip of nearly 8 per cent compared with the final estimate of December 2007, according to the initial estimates.

The final estimate for December 2007 was revised upwards by 21 per cent to $12.82 billion. Comparing it with the initial estimate of December 2008 would mean a 3 per cent dip in exports. The final export numbers will be released on February 1.

The quarterly estimate of Indian exports will contract for the first time in seven years, if the export estimates for December 2008 are taken into account.

Export orders drying up: This decline in exports has been attributed to waning demand from key overseas markets, including the US and Europe. “We do not have orders for exports after January 2009,” said A Sakthivel, newly-elected president of the Federation of Indian Export Organisations (FIEO).

According to commerce ministry officials, the dip in exports between January and March period this year would be lesser. “But after April, this could become worse,” an official said.

Exporters remain unhappy over the fiscal package announced in January, which included restoration of duty neutralisation rates (like Duty Entitlement Passbook Scheme), as well as Rs 5,000 crore credit line to the Exim Bank, which in turn will give loans to exporters at subsidised rates.

Sakthivel demanded that there should be moratorium on term loans in the wake of dip in exports. “If we pay our term loans, we won’t have money to pay for the raw material,” he said. Other demands included increasing the DEPB and Duty Drawback rates by 3 per cent, income tax exemption on export profits and providing export related loans at 7 per cent. “The current 2 per cent subsidy is not enough. Moreover, banks have different interest rates. We should be provided loans at 7 per cent”.

Exporters complained that their competitors in countries like China and Bangladesh were able to sell products at a lower price to overseas buyers. “While Chinese exporters enjoy 7 to 10 per cent price advantage due to high levels of government support, Bangladesh exporters are able to sell their goods at about 10 per cent lower price than us to buyers in Europe, as no import duty is charged,” said Sakthivel.