Ajay Sahai, Director General & CEO, Federation of Indian Export Organisations (FIEO)
To what extent Indian exports are affected by problems in Euro Zone?
The crisis in Euro Zone has its repercussion worldwide and this has resulted in compression of demand in most of the countries, including the emerging economies, besides high volatility in the exchange rate. The global trade is forecasted to grow by 3.7% in 2012 after climbing to over 12% in 2010. Indian exports will not be insulated from such developments. Our exports to Euro Zone, which contributes to approximately 17% of total exports, have already shown slowdown particularly in traditional sector of exports like Apparel, Gems & Jewellery, Handicrafts and Leather products.
Do you think India can achieve 20 per cent growth in exports this fiscal?
We have already touched US$ 303 billion of exports despite growing by only about 10% in last six months of 2011-12. The figures of exports for April-May are not encouraging. We feel that the export will exhibit modest growth of about 10% in first six months of the current financial year, but may grow by about 30% in next six months. This will take our exports to about US$ 350 to 360 billion, close to 20%.
To what extent rupee depreciation will help Indian exports?
Theoretically speaking, the depreciation of rupee should have helped the exports but with demand slowing down, the advantage of competitiveness would not translate into much additional exports. The exports where contracts have already been hedged are insulated from the currency fluctuation but for new contracts buyers are asking for discount as high as 10 -15% knowing fully well the movement of Rupee. We are advising exporters to diversify their export base and move to new destination where the advantage of depreciation can be leveraged with. Do you think recently announced annual supplement to the Foreign Trade Policy will help to achieve the growth rate?
The Annual Supplement to Foreign Trade Policy had its focus on non-fiscal measures to support exports. The only fiscal measure was in the form of 2% Interest Subvention which was much needed as the cost of credit in India has zoomed by 40-50% in last one and half year. However, the initiative to encourage domestic sourcing will give a boost to manufacturing and thereby the exports. The continuation of Zero Duty EPCG Scheme and its availment along with Textile Upgradation Fund, with certain riders, would help in modernization of manufacturing sector. Many measures have been announced for simplifying procedure which would also reduce the transaction time and cost thereby benefiting the export and giving a push to overall exports.
What major steps are required to bring down the current account deficit?
The current account deficit can be managed by reducing trade deficit and ensuring more inflow into country. The softening of crude prices will help us in reducing the trade deficit significantly. If the crude price stays around US$ 80 to a barrel, we would be saving about US$ 50 billion in oil imports in 2012-13. The import of Gold and Silver jewellery is already down about 40% and thus, the saving of these imports can also be around US$ 30 – 35 billion. We need to initiate economic reforms to bring FDI into the country including reform in banking sector, civil aviation and insurance. The close look at Multi Brand Retail in consultation with all stakeholders would make India an attractive destination for FDI helping us to bridge the current account deficit.