In a period of high growth, import costs irk exporters in India

A severe lack of liquidity, volatility in the rupee and a serious credit crunch remain among the major complaints of exporters even as the country is expected to rake up its highest ever export figures in 2018-19.
 
A low-base effect, with minimal growth last year, is behind exports rising by 11.5 per cent in the April-November period of the current financial year, they say. As compared to this, export growth was 12 per cent in the similar period of 2017-18, on an even lower base.
 
Burgeoning demand for Indian goods across major export destinations has led to widespread expectations that merchandise exports will breach the $325-billion level in the current financial year, according to government and industry estimates. "This would be comfortably higher than India's highest ever tally of $305 billion, after which the global financial crisis of 2012 wiped off gains," a senior commerce department official said.
 
This would require at least $27 billion of exports every month for the last four months of the year, something that may very well happen. But exporters are still unhappy because of the dire situation whereby liquidity remains an issue and securing credit is still tough," Director General of the Federation of Indian Export Organisations, Ajay Sahai, said.
 
Cash-only small businesses in the informal sector, who are yet to escape the cyclical, down the line effects of demonetisation and the goods and services tax (GST) regime, were the ones to bear the brunt, Sahai added.
 
These firms make up more than 75 per cent of all exporters by numbers, according to statistics by the micro, small and medium enterprises ministry.

 
Still no credit
 
In the April-November period of the current financial year, exports stood at $271 billion, but less than 42 per cent of all export receipts reached them.
 
FIEO President Ganesh Kumar Gupta reiterated his demand for augmenting the flow of credit to the broader export sector as sharp decline in credits continues. Gupta also pointed out that the Export Credit Guarantee Corporation of India, that provides export credit insurance, is very reluctant to accept new applications, rejecting claims on flimsy grounds. "If banks and ECGC continue to behave like this, we would not be able to register double-digit growth rate in exports," he added.
 
Besides, the volatility of the domestic currency, which makes business unpredictable and makes import costs higher, remains. The domestic currency has risen by about 10.5 per cent since the start of the calendar year, providing a boost to exporters' earnings. However, those in major foreign exchange earning sectors, such as petrochemicals, gems and jewellery, say this has affected costs by a similar margin as these sectors rely heavily on imported raw materials.
 

Sectoral grouses
 
The gold industry continues to see volatility in sourcing raw materials. Its imports rose in July after remaining in the negative for six consecutive months. It has remained low since the ~143-billion Nirav Modi scam earlier this year.
 
Sector-specific complaints also abound in labour-intensive industries such as apparels, which managed to resurface in the growth charts only two months back after witnessing a downturn since October 2017.
 
After zooming upwards by 36 per cent in October, the growth rate of readymade garments - the largest component of textiles — fell to only 9 per cent in November. As more exporters vie for a decreasing pie of earnings, margins have crashed in a sector comprising 80 per cent SMEs.
 
“Institutional issues like the burden of cross subsidies, as well as non-refund of taxes like those on farm inputs and electricity charges, need to be addressed. Also, after the GST, import barriers come down and in certain sectors, incidence of imports have shot up by more than 70 per cent. While the government has raised import duties on many items, the domestic sector needs more safeguarding," said Sanjay K Jain, chairman, Confederation of Indian Textile Industry.
 
Engineering goods sector saw contraction of 17 per cent in November, even on a low base, Ravi Sehgal, chairman, Engineering Export Promotion Council.