Impact on Exports

India's external trade continued to shrink both in June and July, as the overseas and domestic demand remained weak. July exports dipped 26.6% year-on-year basis to $12.53 billion, which was marginally better than the 27.7% negative growth posted in June. Preliminary estimates by the Directorate General of Commercial Intelligence & Statistics showed that imports for the month contracted 37%, steeper than 29.3% dip in July; apparently because of reduced demand.

The export growth has been in negative territory for the last 10 consecutive months now. The imports, too, have contracted for the last 7 months. While some hopefuls have been anticipating some revival of overseas demand in key export destinations like the US by the end of 2009, which view is not being shared by others, the fact remains that it does not appear that India would be able to get any respite. This is being endorsed even by Government of India officials like Rahul Khullar, the Commerce Secretary, who says, "The situation is grim. I do not know when exports are going to register positive growth. The foreign trade policy is the last opportunity to give exporters some help to tide over the crisis."

Impact on Garment Exports

The continuing recession in global markets refused to relent, and has taken its toll in so far as Indian garment exports are concerned, right from September, 2008 through today. While the month-wise status of Indian garment exports has already been discussed, in ample details, in our earlier issues, I would rather like to focus on it in the current fiscal. The information available so far (almost upto the point of going to the press) relates to June 2009. The latest figures show that there has been a depressing decline of 15.4% in the first quarter of current fiscal i.e. from April through June, 2000, as India exported garments worth $2.41 billion against $2.85 billion during the same period last year.

In June 2009 alone, garment exports aggregated to $870 million, representing a fall of 10.15% from $968 million in June, 2008. In May 2009, we could export garments worth $765 million in May 2009 as compared to $863 million in May, 2008, representing fall of 11/35%. In June 2009 we exported garments worth $809 million, representing a fall of 8.71% from $ 886 million in April 2008. The fall was not confined to any particular segment of garments, it was wide-spread and in some cases more acute like silk garments, where exports shrank by a massive 29.31% to $82 million during April to June this year, as compared $116 million in previous year. Man-made fibre clothes declined by 27.2% during first quarter of current fiscal as compared to the previous year. During the same periods, export of cotton garments slipped 14.13%; woolen garments tumbled by 7%, while textile exp orts declined by 5.5%. "Thus the erosion was spread across all categories" said AEPC Chairman, Rakesh Vaid.

Shrinking Employment

It has been noted that the economic slowdown has hit the overall employment situation, though job losses in export-oriented sectors have been the most dramatic. Between April and June, 2009, jobs in export units declined by 1.67 lakhs, while non-export units created 35,000 new jobs, according o the recent Labour Bureau report. Another 48,000 jobs were lost in ITES/BPO units during this period, indicating pressure on Indias services exports as well. Lot of hopes had been raised by the repeated assurance that the export sector, particularly those in labour-intensive areas, would be given help by the Budget 2009-10, but nothing materialized.

A Disenabling Budget

Though not a day passed, ever since the UPA-II took charge of running the country, when some announcement or clarification was not made promising all help to exporters, who had to bear the burnt of global economic slowdown. What they have provided in the Budget Proposals like offering 10 grams of peanuts to a starving person. Apart from some long-term plans of setting up some clusters in handloom sector, inadequate increase in Market Development funds, the Budget proposals announced availability of funds for long over-due reimbursement of 5% subsidy under Technology Upgradation Fund scheme. Even the much-trumpeted Budget provided for funds ONLY to meet the obligations till 30 June, 2009 under the Scheme; thus omitting to provide funds under the Scheme for a period from July 2009 through March 2010.

US Economy Unlikely to Recover till 2011

I trust that the world might have bypassed depression, put behind the recession with some green shoots and may have set foot on way to recovery, but it will have to contend with slow recovery-slower than most of us had expected.