FIEO Update : Increasing global uncertainties may impact demand, India’s exports

FIEO Update

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FIEO Update : The global uncertainties caused by continuing war between Russia and Ukraine has impacted India’s outbound shipments in 2023-24, which recorded a decline of 3.11 per cent to USD 437 billion. Imports too dipped by over 8 per cent to USD 677.24 billion.

FIEO Update : The Federation of Indian Export Organisations (FIEO) has raised concerns about global uncertainties impacting India’s exports. Here’s a summary of their key points:

  • Global Slowdown: FIEO worries that ongoing geopolitical tensions, like the war in Ukraine, could dampen global demand for goods, hurting Indian exports.
  • Data Confirms Impact: India’s exports already dipped 3.11% in 2023-24 to $437 billion, likely due to these global factors.
  • Other Contributing Factors: FIEO also highlights high inflation and rising interest rates as reasons for a potential slowdown in demand, particularly in developed economies like Europe.
  • India’s Relative Advantage: FIEO points out that India’s relatively stable currency depreciation compared to other Asian countries might provide a slight advantage. FIEO Update

Overall, FIEO’s message is that the global situation poses a risk to India’s export growth, and the coming months are uncertain. FIEO Update

The escalating geopolitical tension may have implications for the country’s exports in the first quarter of 2024-25 as it is likely to impact global demand, apex exporters body FIEO said.

The global uncertainties caused by continuing war between Russia and Ukraine has impacted India’s outbound shipments in 2023-24, which recorded a decline of 3.11 per cent to USD 437 billion. Imports too dipped by over 8 per cent to USD 677.24 billion. FIEO Update

“If the global situation continues to be like this, it would impact global demand. In the first quarter numbers, the demand slowdown may be visible,” FIEO Director General Ajay Sahai said.

He added that despite all the challenges, freight rates are softening and it is giving an indication that demand may be impacted in the times to come. FIEO Update

He cautioned that further escalation of the current situation could have serious implications on the world trade.

“Besides geopolitical uncertainties, high inflation and high interest rates are also crucial reasons for demand slowdown,” he said, adding certain advanced economies like Europe may witness more slowdown.

He also said that India’s domestic currency depreciated only about 1.3 per cent during 2023-24 as against Chinese Yuan’s 4.8 per cent; Thai Baht 6.3 per cent and Malaysian Ringgit’s 7 per cent. FIEO Update

When asked about the impact of Israel-Iran war, he said certain exporters from engineering sector have stated that the demand for goods that are going to the UAE and then to Iran has come down.

Jewellery demand may also come down, he said. FIEO Update

The director general suggested the government to take certain steps for exporters at the liquidity front.

“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 longer period. Exporters also need interest subvention support,” Sahai said. FIEO Update

He asked for continuation of interest equalisation scheme.

On December 8, 2023, the Union Cabinet approved an additional allocation of Rs 2,500 crore for the continuation of the scheme up to June 30. FIEO Update

The scheme helps exporters from identified sectors and all MSME manufacturer exporters to avail of rupee export credit at competitive rates at a time when the global economy is facing headwinds. Exporters get subsidies under the ‘Interest Equalisation Scheme for pre- and post-shipment rupee export credit. FIEO Update

“The rates should be enhanced to 3 per cent and five per cent,” he said.

He added that technology and knowledge-based sectors like electronics, electricals, telecommunication, machinery, auto, pharma, medicine and diagnostics would help achieve USD one trillion exports by 2030. FIEO Update

“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. FIEO Update

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