Why India Exports is impacted and why 3000 crore incentive to exporters will make less sense
First of all, Every exporters in Tirupur & India should understand that impact on exports from India is due to the slowdown of imports by various nations that includes china and crash of commodity prices.
As every one know that exporters in Tirupur & India has experienced steady fall in the percentage where September added fuel to the fire by declining India exports at 24.3%. Lets understand something that affect the exporters but our trade deficit is balancing to some extent.
Here is how it is. Up to September 2015, Imports declined at 14.2 Percent to $200 Billion ( $33 Billion Lower ) and exports fell by 17.6 Percent to $133 Billion ( ie, $29 Billion ) there by giving net to net import export balance. It directly means India’s inflation would be under control.
On this level of declining exports, Half Billion Dollars as promised by Indian Government will make less sense where exports could hit 260-280 Billion US Dollars.
How it effects and affect the Exporters in India & India Exports ?
Reason 1 : Crude Oil affects Indian Exports :
All the countries depend on the revenues that are yielded out of their exports to import products. Slowdown of imports is happening across the globe. To be precise, lets say oil exporting countries are seeing steep falling of prices. In 2008-2009. Price of a Barrel was sold at whooping $140/Barrel and now it is selling at just $45/Barrel on Oct 29 2015. So now they face almost a 150% loss in their revenues comparing to 2008-2009. It directly forays in to their purchasing power. They restrict themselves from importing products from other countries for example china is one of the world’s biggest importers cut down its import by 20% and other countries follow suit. If they don’t import more, The probability of export from India becomes less. It eventually brings down India Exports.
Reason 2: Competitive Prices of India Export Products :
Now Most Hottest Topic in the Indian Business Eco-System “Fund Flows on STARTUPS with Exaggerated Valuation” & NDA’s Pro-active Investment policies from abroad & FDI is also paving ways to hurt India Exports. Here is how it is. The rupee is staying stronger at 65 than it should be due to increased investments in to the country via start-ups and industrial investments. It directly means that competing with other exporting countries become tough.
Here is how it is! Let’s say you are buyer from New York, USA, You are trying to import a kg of mangoes. As exporter now, I procure a kg at 60 Indian Rupees from the local market and pack it with all the necessary specification and certifications. I calculate 65 Indian Rupees = 1 US Dollar and sell a kg of mangoes at a dollar. Where other X exporting country is ready to offer one and half kg of same quality mangoes at 1 US Dollar. Eventually the buyer chooses the X exporting country to buy the same quality mangoes where buyer gets more advantage. I am forced to loose the importer as it affects the profits and hurts the running cost of my export business.
This is how when rupee is stronger, To compete with other exporting countries on certain products & commodities gets tougher. It is the industrial expert statement that Indian Rupee is overvalued at 7-7.5 Percent and is one of the highest in the world and it is more than China. All these is happening due to increased fund flows in to the country. It is other helping the country to keep inflation down in the country.
The Exporter’s Eye of Conclusion:
All the Export companies in tirupur & India is depending up on how much the other countries import product from us. For other countries to start importing more, their revenues should go up. It directly means that Price of Oil should considerably increase to a level of $80/Barrel from $45/Barrel today to bring the india exports back to throttle. The only convincing reason is that oil is never been at the level. It has jumped and it has dropped in past 60 years. So, we will continue to believe that markets will fluctuate to bring exporters a good sign soon surpassing this Low-import-export-stability.