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India’s merchandise exports to hit its lowest in five years in FY’16: ASSOCHAM

21 Sep 2015 Evaluate

India’s merchandise exports are forecast to hit its lowest in five years in 2015-16 between $265-268 billion, significantly lower than $310.5 billion in the previous fiscal, mainly on account of sharp erosion in commodity prices globally, according to Associated Chambers of Commerce & Industry of India (ASSOCHAM).

ASSOCHAM has said that it is not as if the entire export drop is coming around on the back of fall in demand for Indian goods. It is only that the global merchandise economy has moved away sharply from a very high cost, ultra bullish commodity situation to a bearish and low cost situation where demand relates mainly to the actual consumption which is rather low key.

It further stated that “Indian exports had achieved a landmark of $300 billion in 2011-12 for the first time making the country a sizeable player in global exports. Afterwards somehow, for one reason or the other we could reach a maximum of $314 billion in 2013-14, only to retrieve in the following year at $310 billion. But the fall this year is going to be very steep,”. The pricing power as was being mirrored in the futures trading markets all over the world - be it for crude oil, metals, coal, copper or even edible items turned out to be rather myopic and has totally disappeared. Hence no sentiment was build up around commodities and hence the demand remained restricted to the real consumption.

It further stated that with the erosion in price tags, the exports in value terms have dropped while in volume, the scenario is not that bad across sectors. India’s export basket comprises commodities, including engineering goods (mostly iron ore /steel and other metals), petroleum products, which have been hit in value terms. For the month of August, the exports of engineering goods were down 29 per cent and petroleum products by 47.88 per cent. However, the erosion is consumption demand, which is more disturbing is seen in leather goods, apparels, gems and jewellery. These products are not a commodity play and reflect the slowdown in consumption and pressure on the consuming economies. Both leather products saw a decline of close to 13 percent readymade garments 7.32 per cent in August. Gems and jewellery witnessed a modest gain of 2.66 per cent which is largely a play of changing gold prices.

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