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Rising raw material prices still major concerns for exporters

01 Nov '10

6 min read

The positive swing in the confidence of exporters despite global uncertainties would be strengthened further if there is a let up in the rising cost of raw materials and the appreciation of the rupee against the dollar, says the latest FICCI Export Survey.

Federation of Indian Chambers of Commerce and Industry (FICCI) Survey reveals that although the Chinese Yuan has gained almost 3 per cent vis-à-vis the US$ in recent months this would have no impact on Indian exports as the price advantage in favor of Chinese products is of a much greater magnitude. For a more meaningful impact, the Chinese Yuan should appreciate by a significant amount according to an overwhelming majority of survey respondents.

The FICCI Survey, conducted during September and October 2010, saw the participation from 254 companies with a wide geographical and sectoral spread. The turnover of the companies that participated in the survey ranged from Rs. 50 lakh to Rs. 22,000 crore and the companies represent sectors like automotive, food and food processing, marine products, gems and jewellery, handicrafts, FMCG, textiles, metal and metal products, heavy engineering, cement, paper, pharmaceuticals & chemicals, wood & wood products and IT software.

Although exporters continue to remain on guard due to the heightened level of competition in the international market, the Survey findings show signs of improvement with exporters feeling more confident about export conditions. Respondents say that the buying activity in the international market has picked up in recent times. The payment conditions have also been reported to have improved.

The mood is reflected by the fact that:
• Importers of gems and jewellery, handicrafts and textiles in US and EU are stocking up in the expectation of better demand in their home markets in light of the upcoming festive season.
• Shipments of metal products are also encouraging given the pickup in economic activity in certain areas of Europe.
• Seafood exports are also gathering pace in the North American region.
• House ware and furniture exports are seeing an increase in the markets of Africa and
Middle East.

In terms of current condition, nearly 64 per cent of the participating firms feel that overall export conditions are much better as compared to the situation six months back. Almost the same proportion of participants have said that current industry level export conditions are much better vis-à-vis the last six months. In terms of export conditions at the firm level, the Survey reveals that nearly 70 per cent of the exporters feel that current conditions are better as compared to the situation six months back.

The Survey participants' expectations regarding export conditions in the coming six months are even more encouraging with every three out of four respondents saying that they expect overall and industry level export conditions to improve in the coming six months.At the firm level, this figure is even higher and stands at 82 per cent. Nearly 60 per cent of the participants have said that their current order book position is better compared to the order book position six months back. In the previous survey 53 per cent of the respondents had reported likewise. This is an indication of the improving demand conditions in the international markets and is contributing to the improvement seen in the overall confidence level of exporters from India.

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