Impact of coronavirus outbreak a mixed experience for India’s exporters | Business Standard News

The Ministry of Commerce and Industry has drawn up a list of 500 items that Indian firms could provide replacements for

India’s exporters have had mixed experiences with their global clients after the outbreak of the novel coronavirus (COVID-19) — some sectors have seen a major decline in trade, while others are seeing clients queue up at their doorsteps looking for alternative sources to reduce their dependence on China.

Sample this: Exports of cut and polished diamonds fell about 41 per cent in February to $1.38 billion, one of the sharpest monthly falls in a decade. To be sure, the sector has been witnessing a slowdown for a while — in the 11 months of this fiscal, exports are down 19.38 per cent to $17.7 billion. Overall, the gross exports of gems and jewellery was down 20.6 per cent to $2.9 billion in February.

However, COVID-19 hasn’t helped. For instance, a major annual industry event that was scheduled to be held in Hong Kong last month was postponed, hitting India’s gems and jewellery exporters hard. One large exporter said that he was not optimistic that there would be a demand improvement in the first half of financial year 2020-21 (FY21).

In this instance, the global economic slowdown has compounded existing domestic issues (like difficulty in securing bank finance).

Law firm Cyril Amarchand Mangaldas said in a report that the anticipation of an economic slowdown had already led several US-based businesses to pull back from agreements for fear of non-performance, leading to a fall in the overall volume of business activity in February to the lowest in the past six years.

Although a slowdown in raw material supply could hurt certain China-dependent industries, it also presents Indian firms with the opportunity of filling the void. The Ministry of Commerce and Industry has drawn up a list of 500 items that Indian firms could provide replacements for.

Garment exporters, for example, have benefitted from the outbreak. Large garment exporters are receiving orders from new customers in western markets, who were traditionally sourcing from China.

Sivaramakrishnan Ganapathi, managing director of India’s largest apparel exporter, Gokaldas Exports, said, “We have started seeing new orders in small quantities in relation to the size of business. China is assuring customers that disruptions will be over soon. End users in western countries are worried and if the disruption continues beyond April, future demand from China may slow down.”

Buyers will then be forced to explore options and Bangladesh and India stand to gain more than Vietnam, Cambodia or other Southeast Asian suppliers.

T Rajkumar, chairman, Confederation of Indian Textile Industry, estimated that exports of finished textile goods, clothing and fabrics could grow 20-30 per cent because of the crisis, though he did not share numbers on this.

Buyers from Europe and the US generally travel to China in January to negotiate with exporters for the next season.

However, most buyers are looking for alternatives now. Ready-made garments exports grew to $1.45 billion (around Rs 10,347.66 crore) in January, from $1.41 billion (around Rs 10,019.39 crore) in December 2019. Auto exports, too, have remained more or less stable. This is because one of India’s largest export destinations for automotive products, Africa, remains relatively unaffected.

R S Sharma, executive director at Bajaj Auto, India’s largest exporter of motorcycles and three-wheelers, said that under the current scenario, “Most certainly the level of economic activity will decline.” Currency volatility and lower oil prices will be other factors to watch out for. The only relief as of now, Sharma said, is that Africa, the company’s biggest market hasn’t been affected by the outbreak yet. One in every two motorcycles exported by Bajaj goes to Africa. The appeal of India as a sourcing base to mitigate dependencies is something exporters could benefit from, he added.

In the past three months, Bajaj has sold more motorcycles in the exports market than domestically, with exports growing an average of 15 per cent since over the period. Exports accounted for 40 per cent of Bajaj’s production in the previous financial year.

Meanwhile, the pharmaceuticals sector has been hit partially. The Indian government placed curbs on export of 13 key active pharmaceutical ingredients (APIs) and formulations made from these APIs. These ingredients were being sourced from China’s Hubei province, which is under lockdown.

An exporter and senior office-bearer of an industry lobby group said that exports in March would see a 5-6 per cent dip because of the curbs. “We are trying to reason with the government on relaxing or lifting the curbs on exports. Already buyers in Europe and the US are worried about further curbs being imposed by India,” he said. He said drugs that are for export markets are different from those made for the domestic market. And the curbs would not help with domestic availability, the industry felt.

“Supplies have started coming from China. About 50 per cent of the regular supplies are coming in now. Moreover, there is enough stock for key medicines like paracetamol in India,” said an exporter.

(With inputs from Rajesh Bhayani, Shally Seth Mohile, T E Narasimhan, Sohini Das)

via Impact of coronavirus outbreak a mixed experience for India’s exporters | Business Standard News

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