NEW DELHI: The escalating geopolitical pressure may have implications for the nation’s exports within the first quarter of 2024-25 as it’s more likely to impact global demand, apex exporters physique Fieo mentioned.
The global uncertainties attributable to the persevering with battle between Russia and Ukraine have impacted India’s outbound shipments in 2023-24, which recorded a decline of three.1% to $437 billion.Imports too dipped by over 8% to $677.2 billion.
“If the global situation continues to be like this, it will impact global demand. In the first quarter numbers, the demand slowdown may be visible,” Fieo director normal Ajay Sahai mentioned.
He added that regardless of all of the challenges, freight charges are softening and it’s giving a sign that demand may be impacted within the instances to return.
He cautioned that additional escalation of the present state of affairs might have severe implications on world commerce.
“Besides geopolitical uncertainties, high inflation and high interest rates are also crucial reasons for demand slowdown,” he mentioned, including sure superior economies like Europe may witness extra slowdown.
He additionally mentioned that India’s home foreign money depreciated solely about 1.3 per cent throughout 2023-24 as towards Chinese Yuan’s 4.8 per cent; Thai Baht 6.3 per cent and Malaysian Ringgit’s 7 per cent.
When requested concerning the impact of the Israel-Iran battle, he mentioned sure exporters from the engineering sector have acknowledged that the demand for items which might be going to the UAE after which to Iran has come down.
Jewellery demand may additionally come down, he mentioned.
The director normal advised the federal government take sure steps for exporters on the liquidity entrance.
“Due to demand slowdown, offtake of goods will be low so foreign buyers will also take a longer period to make payments. So we require funds for a longer period. Exporters also need interest subvention support,” Sahai mentioned.
He requested for continuation of curiosity equalisation scheme.
On December 8, 2023, the Union Cabinet authorised an extra allocation of Rs 2,500 crore for the continuation of the scheme as much as June 30.
The scheme helps exporters from recognized sectors and all MSME producer exporters to avail of rupee export credit score at aggressive charges at a time when the global financial system is dealing with headwinds. Exporters get subsidies underneath the ‘Interest Equalisation Scheme for pre- and post-shipment rupee export credit score.
“The rates should be enhanced to 3 per cent and 5 per cent,” he mentioned.
He added that expertise and knowledge-based sectors like electronics, electricals, telecommunication, equipment, auto, pharma, drugs and diagnostics would assist obtain USD 1 trillion exports by 2030.
“But we have a problem in labour intensive sectors like apparel, footwear, and gems and jewellery as our market share is going down,’ he said.
Meanwhile in a statement, FIEO president Ashwani Kumar said that interest equalization scheme (IES) is one of the most effective instruments to remove cost disability of Indian exports.
The scheme provides much-needed competitiveness to exports, he said adding the interest costs in India are much above that of its competitors’ countries.
“The financial institution price in India is 6.5 per cent whereas the financial institution price in lots of our Asian economies is round 3.5 per cent. With the next unfold, the credit score price in India is mostly over 5-6 per cent as in comparison with such international locations,” Kumar said.
Kumar said that the relevance of the Interest Equalisation Scheme is much more today as buyers are asking for longer periods of credit, with a slowdown in demand and offtake from the shelves, whereas exporters are also looking for larger credit due to a huge hike in Sea and air freight.
“The curiosity subvention charges may even be enhanced from 3 per cent to five per cent for producers MSMEs and from 2 per cent to three per cent for 410 tariff strains respectively as when the subvention was lowered, the repo price was 4.4 per cent which has gone up and presently is 6.5 per cent,” he mentioned.
The global uncertainties attributable to the persevering with battle between Russia and Ukraine have impacted India’s outbound shipments in 2023-24, which recorded a decline of three.1% to $437 billion.Imports too dipped by over 8% to $677.2 billion.
“If the global situation continues to be like this, it will impact global demand. In the first quarter numbers, the demand slowdown may be visible,” Fieo director normal Ajay Sahai mentioned.
He added that regardless of all of the challenges, freight charges are softening and it’s giving a sign that demand may be impacted within the instances to return.
He cautioned that additional escalation of the present state of affairs might have severe implications on world commerce.
“Besides geopolitical uncertainties, high inflation and high interest rates are also crucial reasons for demand slowdown,” he mentioned, including sure superior economies like Europe may witness extra slowdown.
He additionally mentioned that India’s home foreign money depreciated solely about 1.3 per cent throughout 2023-24 as towards Chinese Yuan’s 4.8 per cent; Thai Baht 6.3 per cent and Malaysian Ringgit’s 7 per cent.
When requested concerning the impact of the Israel-Iran battle, he mentioned sure exporters from the engineering sector have acknowledged that the demand for items which might be going to the UAE after which to Iran has come down.
Jewellery demand may additionally come down, he mentioned.
The director normal advised the federal government take sure steps for exporters on the liquidity entrance.
“Due to demand slowdown, offtake of goods will be low so foreign buyers will also take a longer period to make payments. So we require funds for a longer period. Exporters also need interest subvention support,” Sahai mentioned.
He requested for continuation of curiosity equalisation scheme.
On December 8, 2023, the Union Cabinet authorised an extra allocation of Rs 2,500 crore for the continuation of the scheme as much as June 30.
The scheme helps exporters from recognized sectors and all MSME producer exporters to avail of rupee export credit score at aggressive charges at a time when the global financial system is dealing with headwinds. Exporters get subsidies underneath the ‘Interest Equalisation Scheme for pre- and post-shipment rupee export credit score.
“The rates should be enhanced to 3 per cent and 5 per cent,” he mentioned.
He added that expertise and knowledge-based sectors like electronics, electricals, telecommunication, equipment, auto, pharma, drugs and diagnostics would assist obtain USD 1 trillion exports by 2030.
“But we have a problem in labour intensive sectors like apparel, footwear, and gems and jewellery as our market share is going down,’ he said.
Meanwhile in a statement, FIEO president Ashwani Kumar said that interest equalization scheme (IES) is one of the most effective instruments to remove cost disability of Indian exports.
The scheme provides much-needed competitiveness to exports, he said adding the interest costs in India are much above that of its competitors’ countries.
“The financial institution price in India is 6.5 per cent whereas the financial institution price in lots of our Asian economies is round 3.5 per cent. With the next unfold, the credit score price in India is mostly over 5-6 per cent as in comparison with such international locations,” Kumar said.
Kumar said that the relevance of the Interest Equalisation Scheme is much more today as buyers are asking for longer periods of credit, with a slowdown in demand and offtake from the shelves, whereas exporters are also looking for larger credit due to a huge hike in Sea and air freight.
“The curiosity subvention charges may even be enhanced from 3 per cent to five per cent for producers MSMEs and from 2 per cent to three per cent for 410 tariff strains respectively as when the subvention was lowered, the repo price was 4.4 per cent which has gone up and presently is 6.5 per cent,” he mentioned.
