Experts not hopeful of quick exports revival

In spite of the rate of export fall coming down steadily, the prospect of merchandise exports making a comeback to the growth charts anytime soon is still uncertain.

Exports had fallen for the second consecutive month in August, going down by a marginal 0.30 per cent. This constituted a fall in the country's outbound trade on a staggering 20 out of 21 months till August. Besides a global slowdown, the severe fall is attributed to global factors such as a decline in commodity prices due to a glut in supply amidst low demand, as well as sluggishness in the Chinese and European economies', amongst others.

NEVER ENDING WAIT FOR REVIVAL IN MERCHANDISE

• Merchandise exports fell for the 20th time in the last 21 months in August
• While rate of fall in exports has consistently gone down ( 0.30 per cent in August ) industry and experts alike are unsure of when significant growth may happen
• While greater government assistance coupled with a low base effect may push exports into growth zone, it might be erratic and one off.

Although outbound trade fell for 16 major export items, compared to 22 items in July, exporters and trade experts alike cautioned against a hope for sudden exports revival in the month of September, figures for which are yet to be released.

S C Ralhan, the President of the Federation of Indian Exports Organisation (FIEO) said global trade outlook has improved but economic indicators from some advanced economies continue to be troubling. Ajay Sahai, Director General at FIEO said, "we are expecting mild growth next month based on the prices of a number of commodities firming up". He went on to add that the global situation remains fluid and solid growth will take time.

The government is betting on outbound merchandise trade picking up next month, according to Commerce Ministry officials who wish to maintain anonymity. They pointed to the rate of fall steadily decreasing from as high as 24.3 in September 2015 to the latest 0.30 per cent.

 

However, monthly rate of changes should be taken with caution, Madan Sabnavis, Chief Economist at CARE ratings said, instead advising focus on cumulative exports. Cumulative exports for the April-August period of FY17 stood at $108.51 billion, compared with $111.85 billion for the corresponding period in FY16, suggesting a drop of -2.98 per cent.

In the current financial year, cumulative exports have not been able to overtake the figure of the corresponding period last year even once. The same is true for major exchange earners like engineering goods and petroleum products, cumulative exports of which have not matched up to that of the previous year.

In August, petroleum products continued to fall by 14.08 per cent, albeit lower than the 21.78 per cent fall seen in July. As the price of crude oil stays low, the realisation value of crude re-exports in the form of refined petroleum has also stayed down. This is the problem with other commodities as well, whose trade has maintained, sustained or improved in volume terms, but whose value has gone down.

Sabnavis said the global economic conditions have not stabilised to a suitable degree so as to allow hopes of an exports rise anytime soon. He said, "until demand in the importing economies pick up, Indian exports will continue to face a tough time even with improved government support."

On Thursday, the government announced additional incentives worth Rs 1,500 crore under the Merchandise Exports from India Scheme (MEIS) with the number of export items covered going up from 5,012 to 7,913. The rate of incentives has also been increased for certain products.