For the first time in five years, India?s total exports have contracted. The value of exports of goods in October, measured in dollars, declined 15% compared to October last year, according to RS Gujral, director general of foreign trade.
This means India will most likely miss its ambitious export target of $200 billion for this fiscal, because of the financial crisis and the slowdown in demand in major markets like the US and the European Union.
Since India?s exports during October 2007 were $14.53 billion, this fall would mean that shipments last month were just $12.36 billion.
If petroleum products, which constitute around 18%, were excluded, the decline in growth of exports in October would be worse, at 20%.
Since India?s exports are mostly labour-intensive, comprising sectors like textile, leather, handicrafts and gems & jewellery, the slowdown?s impact on employment could be severe.
There was a clear slowdown in demand in the US and Europe, Gujral told reporters at a Capexil function on Monday. The 15% fall in exports follows a rise of 10.4% in September and an average growth of 35% in the first five months of this fiscal. This means the growth rate of exports in this fiscal so far has come down to 21.5%.
?We will miss the export target. We should have had at least 26% growth by now?, Gujral said. The target for this fiscal is an average growth rate of 23%.
?It is a very difficult situation. It is possible that the turmoil in the international economy may continue for about a year, if not more. It is a difficult proposition to think that we can bounce back in a month or two,? the DGFT added.
Except petroleum products (which grew by 10% from last October), most sectors, including the usually buoyant engineering products, were affected in October. According to Federation of Indian Export Organisations (Fieo), the apex body for exporters, employment-intensive export sectors have shown up to 70% negative growth of late. There is a sharp decline in exports of tea -20%, handicrafts -70%, carpets -32%, oil meal -50%, man-made yarn -17%, cotton yarn -19% and marine products -19%, its statement issued on November 6 noted.
India?s largest car exporter, Hyundai, said it had cut down its exports by up to 25% in October. Prime Minister Manmohan Singh has already constituted a high-level crisis committee to monitor the developments and suggest measures to help the exporters.
Gujral said though the Reserve Bank of India has taken measures that lowered the lending rates, more support should be given to certain sectors by reducing the credit problems of exporters.
He said the benefits announced so far have not percolated to the exporters.
Fieo president G K Gupta issued a statement on Monday stating exporters were selling the dollar in forward market in anticipation of a strong rupee, while importing at present exchange rates.
Many exporters, hit by the over 10% rupee appreciation last fiscal, had forward booked their products at just over Rs 40 to a dollar. But with the rupee crossing the 50-mark and depreciating over 20% this fiscal, their hedging positions had gone wrong.