The export decline at 10% for 2020-21
FIEO expects to arrest the decline given that it has converted many orders from a lot of enquiries from countries where anti-China sentiments are high while WTO is reporting lower contraction in global trade.
“We are receiving lots of enquiries from countries where anti-China sentiments are high. Many of these enquiries have been converted into orders, as well,” FIEO said on 25 June 2020 in a release on post-COVID expectations.
The WTO estimates the second quarter trade contraction only at 13%, it noted.
“Therefore, we expect around a 10% decline in India’s exports in the current fiscal. In case of a second wave (of COVID-19), the contraction may reach 20%,” said FIEO.
Initially, looking into the lockdown challenges and projected decline in global trade, FIEO had expected 20% decline in exports for 2020-21.
However, it cautioned that the demand in employment-intensive sectors like gems & jewellery, apparels, footwear, handicrafts, carpets is still a challenge. “We do not expect much improvement in demand.”
Further, FIEO said that the export recovery is likely to be led by pharmaceuticals, medical & diagnostic equipment, technical textiles, Agri & processed foods, plastics, chemicals and electronics.
“Since the domestic demand for petroleum products is extremely low, we may see increasing exports of petroleum as well for such companies to sustain in business.”
FIEO has suggested members look into 3-pronged strategy:
To focus on countries which are providing demand stimuli like US, UK and many other advanced and emerging markets;
Explore countries having high anti-China sentiments led by the US including the EU, Japan, South Korea, Australia, New Zealand, Canada, etc. and
Revisit economies depending on crude & commodities exports as prices of such products are likely to be subdued (the Middle East, LAC and CIS).
FIEO has also called for import substitution to be an integral part of the Foreign Trade Policy as a dollar saved is as good as a dollar earned and both generate economic activity.
While an increase in tariff can be one way to achieve it, the more effective strategy would be to provide an ecosystem which addresses the cost disability of Indian manufacturing leading to such imports.
Import substitution manufacturing should attract interest subvention on credit, offsetting inland freight disadvantage besides equalization of import tariff from free trade areas, said FIEO. fiinews.com