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ASSOCHAM: 2015-16 to be worst year for exports in 5 years
22
Sep '15
In a gloomy forecast, Assocham has said India's merchandise exports are going to hit the lowest in five years at the end of 2015-16 closing the current fiscal between $265-268 billion, significantly lower than $310 billion in the previous fiscal, mainly due to a sharp erosion in commodity prices in the global market and slump in their speculative demand as reflected in futures trading.

“Indian exports had achieved a landmark of $300 billion in 2011-12 for the first time making the country a sizeable player in global exports. Afterwards somehow, for one reason or the other we could reach a maximum of $314 billion in 2013-14, only to fall in the following year at $310 billion. But the fall this year is going to be very steep,” the Assocham study on “Export Outlook in the face of commodity Meltdown”, said.

However, it is not as if the entire export drop is coming around on the back of fall in demand for Indian goods. It is only that the global merchandise economy has moved away sharply from a very high cost, ultra bullish commodity situation to a bearish and low cost situation where demand relates mainly to the actual consumption which is rather low key.

“The pricing power as was being mirrored in the futures trading markets all over the world – be it for crude oil, metals, coal, copper or even edible items turned out to be rather myopic and has totally disappeared. Thus, there is no sentiment build-up around commodities and thus the demand is actually restricted to the real consumption. Nobody is willing to bet for futures and thus there is a meltdown in prices”, the Assocham study noted.

It further stated that with the erosion in price tags, the exports in value terms have dropped while in volume, the scenario is not that bad across sectors.

“Like in the world of technology, disruptive changes are also taking place in the real world of goods exports. It will take time before we adjust from the next fiscal when the low base impact would kick in,” Assocham Secretary General D S Rawat said.

Bulk of India's export basket comprises commodities, be it engineering goods (mostly iron ore /steel and other metals), petroleum products, which have been hit in value terms. For instance, for the month of August, the exports of engineering goods are down 29 per cent and petroleum products by 47.88 per cent.

However, the erosion in consumption demand, which is more disturbing is seen in leather goods, apparels, gems and jewellery. “These products are not a commodity play and reflect the slowdown in consumption and pressure on the consuming economies. For India, they mean a large scale employment”, the study noted.

Export of leather products saw a decline of close to 13 per cent while the export of readymade garments fell 7.32 per cent in August. Gems and jewellery witnessed a modest gain of 2.66 per cent on the back of changing gold prices, the study said. (SH)

Fibre2Fashion News Desk – India

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