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Indian exports on a long losing streak

Indian exporters have been yielding ground to China and other Asian countries. This has resulted in massive job losses in several labour-intensive sectors.

business Updated: Nov 04, 2009 23:48 IST
Gaurav Choudhury

It was difficult to ask people to leave their jobs. I almost broke down when I saw the faces of some people standing on the roadside on my way to office one morning. These were the same people we had asked to leave their jobs the previous evening. But we had to do it to survive.
M. rafeeque ahmed,
Chairman, Farida Group

As the head of a company that exports footwear, Ahmed is a small businessman with a big worry. So is the case with the artisans of Moradabad, Barmer, Agra and Mysore.

India’s exports contracted for the 12th successive month, plunging by 13.8 per cent in September, as orders from countries in Europe and the United States (US) dried up amid the worst economic downturn in the past 80 years.
At present, over 55 per cent of India's $168 billion exports are destined for Europe and the US, the regions worst hit by the global credit crisis.

The downturn in exports started in mid-2008 when retail orders from the European Union and the United States shrank because of the worldwide recession and changing consumer spending behaviour.
Shrinking world demand has affected exports of India’s handicrafts, gems and jewellery, leather and textile severely in the last one year.

This has led to job losses in these sectors. In 2008-09 an estimated 1.257 million mandays of jobs were lost in the export sector. (If two men work five days each a year, it means 10 mandays.)

In August, the government had unveiled a mix of procedural measures and fiscal incentives for trading with non-traditional destinations such as Latin American and African countries.

“New emerging markets have been given a special focus to enable competitive exports … Incentive schemes are being rationalised to identify leading products, which would catalyse the next phase of export growth,” Commerce and Industry Minister Anand Sharma said while unveiling the policy.

Exporters say that Indian products are becoming uncompetitive because of prices in the world market.

“China has been able to offer much better prices since it has increased drawback refunds in the past one year, from 11 to 17 per cent,” said Apparel Export Promotion Council Chairman Rakesh Vaid.

Under the duty drawback scheme, exporters get refund for taxes paid on imported inputs used to manufacture products that are eventually exported.

Also, competition from Bangladesh, Sri Lanka, Vietnam, Cambodia and Indonesia has been hurtful for India.

“The focus is now on new emerging markets such as Latin America, Central Asia, Africa and South East Asia,” said Rakesh
Kumar, executive director of the Export Promotion Council for Handicrafts.

“Places such as China, West Asia, South East Asia, Australia and Brazil are likely to witness faster recovery. These areas can provide viable and sustainable markets in order to reduce India’s reliance on the European Union and US for its exports,” a United Nations Conference on Trade and Development (UNCTAD) study said.

“Garment exports during 2009-10 will not cross the $9 billion mark unless there is a dramatic recovery in coming months,” said Vaid.

In 2008-09, Indian garment exports totalled $10.17 billion.

“During April to August 2009, handicrafts exports have fallen more than 21 per cent due to the slump in global markets,” Kumar said.

India’s major handicrafts manufacturing and export centres are Moradabad (339 km north-west of Lucknow; known for brassware), Kutch (93 km north-west of Ahmedabad; known for embroidered goods), Mysore (140 km south-west of Bangalore; known for wooden art wares), and Agra (200 km east of Delhi; known for hand-printed textiles).

However, Vaid said the government's efforts to penetrate new markets of Latin America, West Asia and the region of Australia and New Zealand would take a long time to yield results.

Till then, pray for a quick recovery in the US and EU.