Exporters smile as order books bloat

“We are very happy,” exclaimed an elated Rafeeque Ahmed, one of the largest Indian leather-goods exporters, who has the likes of Walmart on his buyers list, as the rupee on Tuesday hit an all-time low of 64.13 against the dollar. It later recovered to close at 63.25.

Ahmed, who is also the head of the Federation of Indian Export Organizations, is asking exporters to take full advantage of the situation and increase the market share which got lost due to the financial downturn and Euro zone crisis.

While the industry is crying foul over the falling rupee, there is a silver lining in the country’s merchandise exports showing good numbers this financial year.

Last year, total exports fell by 1.76 per cent to $300.60 billion over 2011-12.

According to Ahmed, by the beginning of the third quarter, exports might rise by at least 20 per cent on the back of a healthy order book position across sectors that have low import content such as leather, engineering, gems and jewellery, carpets and handicrafts, all expected to do significantly well this year.

Interestingly, these are the very same sectors which got clobbered during 2010-11 and 2011-12 due to the ongoing financial recession and subsequently the crisis in the Euro zone, which saw a complete downturn in demand for Indian goods. But currently, they are looking to be the most promising sectors.

Leather exports, Ahmed said, are expected to reach $6 billion over $5 billion in 2013-14.

As a result, he said, there is a possibility for generation of jobs. The sector saw massive job loss since 2009 onwards.

Similarly, engineering exports in 2012-13 fell by 3.19 per cent to $56.8 billion from $58.6 billion achieved during 2011-12.

This financial year, engineering exports are expected to rise by one-two per cent over 2012-2013, according to the Engineering Export Promotion Council.

However, the key export destinations of the US and Europe, which account for almost 31

per cent of total engineering exports, are still in the negative zone.

“Engineering exports are based on long-term contracts. Reworking such contracts takes time and the buyer also negotiates.

"So, the net impact many a times is more uncertainty. As engineering exporters, we seek two or three critical things in terms of a revival in the global market demand or a successful strategy of market diversification, stability in exchange rate in the short period and low cost of working capital and rupee credit so that industrial product picks up,” said Aman Chadha, chairman, EEPC.

Tilak Raj Manaktala, a Delhi-based textile exporter and president of Delhi Exporters Association, said he hopes to see a boost in textile exports this financial year and catching up with competitors such as China, Bangladesh and Vietnam.

“It is indeed a very good time in the short-term period. No doubt, we are going to earn some handsome profits. But then, we are worried for the mid and long-term situation, as buyers are now asking for a reduced price.

As the rupee is falling, buyers are renegotiating the prices. So, we have no choice but to quote a lower price in fresh contracts.”

According to Ajit Ranade, chief economist, Aditya Birla Group, exporters must view the situation as a window of opportunity.

“This is a window of opportunity for the exporters.

"Now is the time when we can make up for the loss the export sector made in last two financial years.

"We should now broaden our focus and the government should continue providing the support it is giving to the exporters. Textiles and agricultural exports should also do well.

Besides, this year the monsoon has been good, so agricultural exports should rise.”

Last financial year, exports fell for eight straight months from May to December over the previous financial year.

In the first four months of this financial year, exports fell for two months compared to last year in May and June by 1.11 per cent and 4.56 per cent respectively.