India could further cement its position in global supply chain: FIEO president
Says with demand and supply situation expected to show signs of green shoots during theyear-end festive season, we may see revival in the economies across the world from early next year
India's trade deficit was almost $26 billion in June, which has now risen to $31 billion. There are worries about the current account deficit. How long will it take for the deficit to come under control?
Imports growth of over 57 per cent during June 2022 is of concern and has been mainly on account of petroleum products; Coal, coke and briquettes; gold; electronic goods; organic and inorganic chemicals and artificial resins, plastic materials, etc, which may be looked into. However, the rising imports of gold may lead to impressive gems and jewellery exports in the coming months. Crude prices have also added to the import bill of petroleum products, thereby to the import basket of the country. Trade deficit and current account deficit may not be of concern in the long run, for the trade deficit is expected to go down as many Indian companies have advanced their imports to overcome the supply-side disruptions and now managing large inventories, which will reduce their imports in future.
The softening in metal prices and hopefully the crude prices shortly will also reduce the deficit. Moreover, with the rise in merchandise and especially services, exports will come handy. FIEO, with support of the government, is working on a strategy to further promote services trade, as Covid-19 pandemic has changed the pattern of international trade, moving further more towards services trade.
When would the overall normalcy be restored? That is, the pre-pandemic conditions.
Though it seems that the situation in the global economy, including India, may see an improvement from the third quarter of the FY23, much will depend on the quantum of correction in the global factors impacting the economies across the globe reeling under rising inflationary pressure due to high crude oil prices, disruption in global supply chain due to geopolitical situation arising out of Russia-Ukraine war, currency depreciation, and high food and commodity prices.
Normalcy in the global economy and international trade, especially exports to the pre-pandemic levels, may be a little early to predict now, but with demand and supply situation expected to show signs of green shoots during the year-end festive season, we may see revival in the economies across the world from early next year.
Which issues are troubling exporters the most?
Global trade has started showing signs of contraction. It is facing a triple whammy: shift in consumption from goods to services; high inflation across economies, thus reducing the purchasing power and pushing interest rates; and high inventories. However, these are driven by the market forces with no role of government. The sharp depreciation of currencies against the dollar as compared to rupee, which showed only modest depreciation, is a cause of concern for the export sector. Then there is the northward movement in credit rates, which affects our competitiveness.
How is the PLI scheme working for the exports sector?
The Production Linked Incentive (PLI) Scheme for the man-made fibre (MMF) and technical textiles is a game changer for the Indian textiles industry. The decision of the government under the leadership of Prime Minister and the continuous guidance and support of the Commerce & Industry and Textiles Minister and the Finance Minister, the scheme addresses the major concerns of the garment exporters by encouraging domestic manufacturing of man-made fabrics which was hitherto imported. This would add to domestic value addition with attendant benefits in employment.
The scheme has helped in realigning our exports strategy, which so far has been dependent on cotton products to move to man-made and technical textiles. The scheme will attract investment both domestically as well as through the FDI route as many companies in North and Far East are keen to invest in the MMF and technical textiles sectors.
The PLI investment in electronics, machinery, and automobile and auto components will help us to push exports in segments, which account for roughly 35 per cent of global imports. This will reduce our import bill significantly in the next four to five years.
The focus on setting up the unit in Tier-III and IV cities as well as in rural areas will help in inclusive growth and provide jobs at the doorstep. Since the priority under the scheme is job creation, the investment sought under it and the capital employment ratio in the textiles industry will help us cross the direct employment target of 7.5 lakh.
Further the PLI Scheme will make India Atma Nirbhar in man-made fabrics, thus paving the way to make it a global champion in man-made apparels and technical textiles as well. The PLI Scheme will further help us in building as we continue to move ahead.
What do you expect from the government?
The government has come up with a slew of measures to support the exports sector, including the recent announcement of reduction in central excise duty on petrol and diesel, reduction in import duty on the raw material of steel and plastic, and increase in export duty on iron-ore & steel intermediates. Besides, reduction in customs duty on raw cotton from 10 per cent to zero, extension of the interest equalisation scheme, extension of the FTP 2015-20 by another six months and extension of time for filing of MEIS/RoSCTL/ROSL scrips, has imparted competitiveness to manufacturing, exports, and push value-added exports from the country.
However, there is need to further push value-added exports, increase subvention under Interest Equalisation Scheme, 25 per cent enhancement of limit under ECLGS, augment container manufacturing, develop an Indian shipping line of global repute, increase the validity of RoSCTL and RoDTEP scrips to 24 months and link transferability with realisation, extend RoDTEP to EOUs, SEZs and Advance Authorisation, expand usages of RoDTEP and RoSCTL scrips and more logistics support for the sector looking at the higher freight cost.
Do you see any backlash against exports from India to the Western nations because of our neutral stance in the Ukraine war?
No, we do not see any backlash against exports from India to the Western world including the US. The entire world understands and appreciates our position. We are striking a nice balance in our domestic and international requirements. In fact, our exports to the US, the UK, the EU and other NATO countries have seen constant growth during recent times, especially during the Russia-Ukraine war. Countries are looking at India as a major and reliable supplier of food and pharma products. Besides, it has also come as an opportunity for the overall exports sector, as India could further cement its position in the global value and supply chain.