Tradeindia Exim Newsletter

Exim Newsletter,April 3, 2012

CEO's Note

Exports outlook for FY 2013: A bird's eye view

The Commerce Ministry has churned out another round of foreign trade data yesterday, revealing that our exports have continued to drift down. In February, overseas shipments grew 4.3 percent to $24.6 – at the slowest pace in the last three months. These statistics are, however, not shocking as it was widely anticipated that the third and fourth quarters of the last fiscal were to be challenging due to economic slowdown in European economies.

From the recent happenings in most of the European economies, it is quite clear that 2012 will be a rough ride for the European Union. A recent World Bank report has also cautioned this euro-zone crisis along with weakening growth in several big emerging economies may have some downside effects on developing countries. Keeping these dimming global growth prospects, I think that it is the right time for our government to extend a helping hand to the sector.

Firstly, our exporters and MSMEs are facing two major hurdles at this moment: they are high cost of credit, which, needless to say, is the side effect of the RBI's past monetary measures, and infrastructure bottlenecks, which have been taking competitiveness out of our exports. In the recent Budget announcements, the second issue has been addressed to some extent but the first one is still left unaddressed. Policy makers need to do something urgently in this area.

Secondly, I think market diversification should further be encouraged to minimize dependence on traditional export markets and the possible impacts of demand slowdown there. Already, we have reaped considerable benefits from this strategy and in the upcoming Foreign Trade Policy (FTP) announcements, I hope the government will broaden the scope of some schemes, such as the Focus Market Scheme (FMS) and Focus Product Scheme (FPS) to help our exports diversify further.

The recent BRICS summit reminds us again about the potential opportunities in our neighboring countries, and the five-member nations' decision to allow trade in local currency will reduce exporters' dependence on the US dollar and the euro, and insulate them from sharp fluctuation in currencies. Another recent positive development in the export front is the decision by Pakistan to ease trade with India by shifting from a Positive List regime.

Keeping the above developments in mind, I think the government can catapult our export performance by means of some crucial supportive measures, particularly by ensuring adequate credit to the sector and additional export assistance to promote the market diversification strategy. In addition, it is equally important for individual exporters to do away with over dependence on some select few markets. There are still many untapped markets far and near that get little limelight but offer great opportunities. Those who will discover this secret will certainly beat any odds and bask in success.

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