Dark Clouds Over Indian Merchandise Export Sector Revival

India Inc, which was expecting to witness some improvement on the merchandise trade front by the start of the second quarter of the current financial year, is likely to face disappointments in the coming months.

Economists and analysts believe that the gloomy trading outlook and the uncertain macro-economic climate are likely to continue for some more time now. There are slim chances of reversing the slowdown in India's merchandise exports in the near term.

No relief yet

The statement issued recently by the Finance Ministry has poured the proverbial ‘cold water’ over the hopes of all those awaiting an early revival on the export front. Pranab Mukherjee, the Union Finance Minister, expects the country's growth to decelerate in the next two quarters. The Indian economy is expected to rebound only from the last quarter of the current financial year.

“Although the industry has begun picking up momentum, the demand for Indian merchandise products in the key western markets such as the US, the UK and Europe continue to remain dismal. The export growth continues to be weighed down by the hostile trading environment,” said Ashish Maheswari, Proprietor of Sonu International, a small-sized apparel exporting unit in Kolhapur, Maharashtra.

India’s merchandise exports, plunged for the 10th straight month in July 2009 since October last year, falling by 28.4% in July 2009 to US$13.62 billion from US$19.04 billion posted during a year-ago period. The declining trend of the export sector has, to a certain extent, played down the optimistic outlook that was created on the back of resurgent domestic demand.

“An immediate revival of the export sector looks doubtful unless the European economy emerges strongly from the recession,” said A Ghosh, an executive working with Kamal Engineering Works, a small-sized manufacturer of engineering tools in Kolkata.

Going by the industry projections, merchandise exporters, including SMEs, will have to brace up for more stiff challenges before they can witness a complete recovery.