 "Exports likely to again contract in FY15")
Consecutive months of double-digit decline, coupled with poor performance of the top exporting sectors, are likely to drag down shipments, even as exporters continue their long wait for the government to unveil the new Foreign Trade Policy (FTP).
Exports had fallen 1.85 per cent in 2012-13, when shipments from India reached $300 billion compared to $306 billion in 2011-12. In 2009-10 as well, exports fell, by 3.4 per cent year-on-year. If exports do fall this financial year as well, it would be a third decline in six years.
In 2014-15, which ends this month, exports saw a double-digit fall in January and February - 11.2 per cent and 15 per cent, respectively. In fact, it was the third consecutive decline in exports in February and the fourth in the current financial year.
"This is the only financial year when the fourth quarter is performing poorly. Generally, exports have a tendency to pick up in the last quarter. This year, it looks difficult to reach even what we achieved last year," said Soumya Kanti Ghosh, chief economic advisor, State Bank of India.
The target was to achieve $340 billion worth of exports in 2014-15. However, the sector got adversely impacted on account of muted global demand, reflected in a huge fall in commodity prices. This led to a decline in export of the top five sectors, of which the biggest contraction was registered by petroleum products and agricultural commodities.
Petroleum exports used to be the biggest item of outward shipment, about 20 per cent of the country's total. In February alone, export of petro products fell 54.6 per cent to $2.1 billion, over the $4.6 billion in the same month of 2013-14.
"Lower oil prices have led to an almost 50 per cent decline in the dollar value of petro exports in January and February, year-on-year. At the current rate, exports will barely manage to touch last year's level," said D K Joshi, chief economist, CRISIL.
In fact, an official strategy paper of 2011 had envisaged a much higher export figure for 2014-15. The paper, prepared by then commerce secretary Rahul Khullar, had envisioned exports would reach $500 billion by 2014-15.
It had said there would be a big leap if there was diversification. As a result, the FTP in subsequent years offered a slew of sops for marketing of produce in the newer markets of Africa, Latin America and the Asean region. However, exporters failed to effectively look beyond the traditional markets of America and Europe. These failed to give robust returns, owing to the slowing in their domestic economies.
As complete global recovery is yet to come, merchandise exports have continued to hover between $300 billion and $314 billion since 2011-12. In 2011-12, it was almost $306 billion; in 2012-13, it was $300.4 billion, and in 2013-14, $314.4 billion.
"Exporters have to become aggressive in venturing into the newer markets, without which exports will not take a quantum leap," Ghosh said.
Apart from petro products, he said exports got clobbered this financial year also because of falls in the outbound shipments of agricultural items, textiles, gems and jewellery. The fall in the last category has largely been due to the restrictions in import of gold, now relaxed significantly. In agri export, items facing a downward spiral are rice, meat products and oilmeal, due to low food prices worldwide. According to the latest official data, export of oilmeal, rice and cereals contracted 45.5 per cent, 12.4 per cent and 56.8 per cent, respectively, in February.
Exporters, on the other hand, are miffed that the new government is yet to detail a strategy for foreign trade. In the Union Budget for 2015-16, unveiled last month, there was no mention of specific incentives for the community. One of their main expectations had been extension of the two per cent interest subvention across all sectors.
According to M Rafeeque Ahmed, president of the Federation of Indian Export Organisations, and a leading leather exporter, the sharp decline in the value of the euro against the dollar was also responsible for the double-digit decline in Indian exports in January and February. The euro's value came down to a 14-year low against the dollar. As a result, pricing has become a major issue in that market, which accounts for 18.5 per cent of our exports. Traditional sectors such as apparel, textiles, gems and jewellery, leather goods and machinery are heavily concentrated in the euro zone.
The World Trade Organization (WTO) has cut its growth forecast for merchandise exports in 2014 and 2015. According to WTO, trade in goods will grow by 3.1 per cent against earlier projection of 4.6 per cent in 2014 and four per cent against earlier forecast of 5.3 per cent in 2015.