Exports returning to positive territory in November are on expected lines amid continuing challenges in most economies due to economic slowdown and rising inflation, said A Sakthivel, President, Federation of Indian Export Organisations.
“Marginal increase in merchandise exports is a reflection of the toughening global trade conditions on account of high inventories, economies entering recession, high volatility in currencies, and geopolitical tensions, he said in a statement.
Merchandise exports for November 2022 grew moderately at $31.99 billion compared to $31.8 billion, while imports rose to $55.88 billion as against $53.03 billion in November 2021.
The drop in commodity prices and restrictions on some exports to stem the domestic price increase has affected the growth numbers. Going forward, we should look at the upcoming Fed rate hike decisions that may add pressure on the flight of capital with the Bank of England going for a recent rate hike, he added.
Growth in only 15 out of 30 major product groups is of concern and FIEO believes that the coming months would be challenging unless global economic growth and the geopolitical situation improve drastically.
However, the minor increase in imports is due to the jump in import of petroleum, crude & products, fertilizer and coking coal, etc. We hope that the energy prices would come down further giving relief on trade deficit, stated Sakthivel.
The import performance over the next few months will be a key watch out for signs of weakness in domestic demand. The silver lining is the moderation in trade deficit to a five-month low of $24 billion. However, a sustenance of this trend remains critical, said Rajani Sinha, Chief Economist, CareEdge.
“In the current situation, the focus should be on providing liquidity at a competitive cost to the export sector and therefore, RBI may consider opening export credit refinance facility to banks so as to encourage them to lend to the export sector with refinancing from RBI at the Repo Rate, said FIEO Chief.
While seeking restoration of Interest Equalization support to the pre-covid levels, Sakthivel urged the Government to look into the request of the exporters for continuing with IGST exemption on freight, which lapsed on September 30, 2022, particularly as the freight rates are still at the much-elevated level and GST on such freight will affect the expoters liquidity, though refundable later.