FY10 exports slip 4.7%, Europe crisis looms

$200 B TARGET UNDER CLOUD

INDIAN exporters managed to battle the global economic crisis with aplomb to close the 2009-10 fiscal with shipments worth $176.5 billion, a bare 4.7% lower than the previous year, but the shadow of the fresh financial crisis in Europe looms large over the future. 

    The export target of $200 billion for 2010-11 set by commerce minister Anand Sharma, although modest, could be at stake if the Greek contagion spreads to larger parts of Europe. 
    "That (Europe) is the joker in the pack," said commerce secretary Rahul Khullar. Europe accounts for 26% of India's exports. 
    The recovery in exports began in November 2009, after a 13-month fall, with March exports growth touching an all-time high of 54%. 
    Imports grew at an even faster 67% in March, indicating the strong recovery in the domestic economy that is buying capital goods in large quantities to expand capacity to meet rapidly rising demand for goods. 
    Imports for 2009-10 are pegged at $278.7 billion, down 8.2% from a year ago, leaving a trade deficit of $102 billion against a deficit of $118 billion in the previous fiscal. 
    Though all exports have grown strongly in recent months, many sectors are still in the red. 
    But the bigger concern at this stage is Greece. The debt crisis in Greece, which could spread to Portugal, Spain and Italy and has resulted in a further depreciation of the euro, has exporters worried. 
    "It is an extremely precarious situation as losses have already started mounting and things could get much worse," said SP Agarwal, an exporter of handicraft and madeups to Europe. Exporters to Europe expect cancellations 
ORDERS booked earlier this year at major fairs in Europe were proving to be unviable as a Euro now fetches Rs 57 as opposed to Rs 67 earlier. 
    Exporters to countries such as Italy and Spain are now expecting cancellations and other associated problems like rejection of consignments. 
    The government concedes Europe could be a big concern. "Europe is an imponderable not factored into our equations," said Mr Khullar adding that the policymakers expected 2010-11 to be smooth but it has not turned out to be so.
    The government is, however, not thinking of any intervention or support at this stage other than those already under consideration. 
    The director general of foreign trade (DGFT) is doing a sectoral study and some more incentives for export sectors still in the red could be on the cards. 
    "The foreign trade policy will be tweaked and wherever required we will give more support to sectors that are still needy," he said. The study is expected to be concluded in July. 
    Indian Institute of Foreign Trade (IIFT) director KT Chacko is less pessimistic. He believes that the recovery in exports was likely to stay on track despite the turmoil in the EU. 
    "If the products that we are exporting to Europe are competitively priced, we should be okay," he said, adding that the export target of $200 billion was feasible. Mr Khullar said that while the government had given incentives for market diversification, it would take time to make a difference. Maybe exporters would now see that there is merit in what we said, he stated. 
    Sectors that are still negative, such as engineering, readymade garments, yarn, chemicals, oilmeals, electrical goods and leather, account for 40% of exports while gems & jewellery and petroleum, which account for another 30%, h ad near-zero growth. Sectors that have done well include tea, tobacco, fruits & vegetables, marine products, iron ore and plastic & linoleum.