The negative growth of engeneering exports is likely to bring down the country?s forex reserves to $150 billion from the present $245 billion in next three-four months.

A senior commerce ministry official told FE that foreign exchange reserves, which was at $320 billion in the first week of September, has came down to $245 billion at present because of an average 10% decline in major sectors of the country, except the textile sector, which experienced a 15% fall, mostly hit by the slowdown in exports.

The country?s engineering exports stood at $3,3381.86 million in 2007-08 as against $2,64,90.92 million in 2006-07. For the period from April to October 2008, the country?s engineering exports grew by 49.42% to $26,667.52 million from $17,846.1 million in 2007-08. But in October this fiscal, the growth was only 0.8% at $2,893.34 million as against $2,870.38 million recorded in the same period a year ago. This is indicative of the declining trend, although the engineering exports likely to register an overall 10-15% growth this fiscal as against the 20% growth last fiscal.

The Engineering Export Promotion Council(EEPC) India chairman Aman Chadda said this positive growth is not indicative of the fact that the engineering sector is better off than other sectors. Engineering sector has a longer gestation period than other sectors, for which it is still continuing to show a growing trend.

The worst is still to come, with the decline in engineering exports to be seen from April next year and the impact on forex starting from around the same time. ?The pinch of this will be felt more intensely from January,? Chadda said.

According to Rakesh Shah, former EEPC India chairman, the engineering sector was the only sector which recorded a positive growth rate in October this fiscal ensuring that engineering exports may exceed the last year?s export growth of $33 billion by 10% to 15% this fiscal. But the major impact of the crisis will be felt from April 2009 or at the very start of the next fiscal, when the current order cycle would be completed for the companies.

Chadda said a special task force(STF), which was constituted to find out the impact of global financial crisis on the Indian engineering industry, has asked the government to come out with measures so that the sector does not start the next fiscal with a negative growth.

?It took decades for the Indian engineering sector to gain foreign markets and so it should try to retain it at any cost,? Chadda said.

Chadda said the STF recommended the Centre to work with World Bank and IMF to ensure lines of credit with liberal conditions to countries at the bankruptcy zone. This would make possible to address the problem of plummeting demand worldwide.

?The engineering exporting community does not look forward for any major fiscal concession or subsidy from the government over and above what has already been given. But the government should ensure that whatever has been announced is fully implemented without any procedural hassles,? Chadda said.

According to Shah, liquidity injection is a critical factor. Lowering CRR and SLR would provide funds to the banks, but the banks, at the same time, ?should start providing liquidity to their customers rather than holding government treasury bonds.

?RBI should direct banks not to put too much stress on collateralised banking in the present situation. Instead, the RBI and the government should be willing to guarantee non-collateralised lending to small and medium scale sector especially,? Shah said.

Of the Rs 20,000 crore dole out, which the government initially announced to cope with the crisis situation, Rs 350 crore was earmarked for the engineering sector but without clarifying in what form it will come. The STF recommended that the amount should be used to enhance duty entitled pass book rates by 2% across the board, since the rates were lowered by 2-3% last month, Chadda said.

The engineering sector, which provided direct and indirect employment to over 4 million people, has already cut down workforce by an average of 35% for the slowdown. While, for the low demand, steel production has already been cut down by 1.5 million tonne, the global automobile industry, the most important segment for the engineering sector, is foreseen to cut production by 25% at 50-52 million units in 2009-2010 from 64 million units in 2007-08.

However, India has an opportunity to capture the Chinese share of the market because with the Chinese Yuan appreciating against the US dollar and the rupee depreciating against the same, Chinese production would cost more now and become less competitive, he said.