Export figures for Aug disappoint optimists

Exports have grown from a low of $10.27 billion in April to $19.18 billion, $21.91 billion, $23.64 billion, and $22.70 billion in the subsequent months. The pick-up in growth seen after the severe lockdown in April seems to have run out of steam. Exports for the April-August period this year at $97.66 billion showed a negative growth of 26.65 per cent in dollar terms compared to April-August last year.
 

During this period, positive export growth is seen mostly in primary products/ commodities such as iron ore, oil meals, oil seeds, fruits and vegetables, meat, dairy and poultry products, rice, other cereals, cereal preparations and miscellaneous processed items, tobacco, coffee, jute manufacturing including floor covering and carpets.
 

Among manufactured goods, only drugs & pharmaceuticals and plastic and linoleum have shown positive growth.
 

Major labour-intensive sectors such as gems and jewellery, leather and leather products, ready-made garments of all textiles, electronic goods, engineering goods, ceramic products and glassware, handicrafts, cotton or man-made yarn/fabrics/ made-ups, handloom products, marine products, mica, coal and other ores, minerals, including processed minerals, have all shown negative export growth. Exports of even petroleum products, tea, spices, organic, and inorganic chemicals have fallen.
 

This export performance has to be seen against the backdrop of a surprising recovery in global trade after the deep slump early this year. The trade restrictions on medical goods and medicines have dropped in many countries.
 

Trade in protective equipment and electronics that facilitate working from home has gone up. Monetary and fiscal measures and quicker lifting of lockdowns, especially in richer countries, have helped shore up demand and aid faster recovery of economies. Ocean freight rates have gone up reflecting a pick-up in world trade.
 

The Federation of Indian Exporters Organisations (FIEO) says exporters have started receiving a lot of enquiries and orders from across the globe helping many sectors to show improved export performance, which is likely to get better in the next few months.
 

The Commerce Minister said that in the September 8-14 week, the value of exports is $6.88 billion, up by 10.73 per cent over the same period of previous year.
 

“This is indicative that India is in a move to get back, our resilience is showing, our confidence is emerging, our can-do spirit is reflected in all these numbers,” he had said.
 

There are, however, several factors that may come in the way of export growth. The stoppage of duty credit benefits under the Merchandise Exports from India Scheme (MEIS) has worsened the liquidity problems of exporters. The cap on MEIS benefits has forced exporters to not factor in the benefits in their prices. The domestic inflation (at 6.69 per cent in August) is stubbornly higher than the upper threshold for policy tolerance of 6 per cent for the fifth successive month.
 

To stem the higher prices, the government banned exports of onions suddenly.  Speculative inflows into the equity and bond markets and foreign direct investment into companies of influential businessmen has caused the rupee to strengthen to about Rs 73.50 to a US dollar, adversely affecting exports, making imports cheaper and lowering the Customs revenues. The enforcement agencies have stepped up their efforts to garner more revenues. Covid-19 cases are rising and supply chain disruptions continue.
 

So, the optimism on exports growth needs to be tempered. Email: tncrajagopalan@gmail.com