New Trade Policy in jeopardy? Assocham says exports may remain flat at $310 billion this year

India’s exports are likely to remain flat at USD 310.5 billion-level or may even fall this financial year due to slow global demand for merchandise, Assocham has said.

“Overall the trade confidence is quite muted,” Assocham Secretary General D S Rawat said, impressing upon government to move fast on improving ease of doing business and reducing transaction costs for Indian shipments.

The country’s exports stood at USD 310.5 billion against a target of USD 340 billion for 2014-15 fiscal.

While there has been a weak trend since July 2014, exports have been witnessing contractions since January this year right through April, the industry body said.

In fact, generally the last quarter of the fiscal turns out to be much better to make up for the previous quarters.

However, it has been a different situation in the last quarter of fiscal 2014-15 and the first month of 2015-16, it said.

Engineering products, gems and jewellery and petroleum products are the biggest contributors to the overall export basket in terms of value.

In the previous fiscal, while engineering goods registered a modest increase, the other two segments witnessed a sharp drop.

“The trend is likely to continue at least for gems and jewellery, while the situation may somewhat stabilise for the petroleum segment since after seeing a sharp fall, the crude oil prices have stopped seeing much of drop. Petroleum exports are related to the prices of crude oil,” Assocham said.

The industry body pointed out that the US is still not firm in growth as was witnessed in the first quarter of 2015 when its economy had contracted. Stronger dollar hit the US exports.

In the euro zone, it was somehow better in the first quarter but it is quite puzzling and unsure. The emerging market pack remains in a challenging situation with China adding to the major woes, Assocham said.

Going forward, the merchandise exports are likely to average around $22-25 billion a month till the end of second quarter of the current fiscal.

The shipments would improve thereafter, but the upside remains limited, the chamber noted with concern.

However, the impact of the flat or some drop in exports would not have major impact on the trade balance since imports too would remain in muted form because of the poor consumption demand in the domestic Indian economy.

Imports too would remain between $440-450 billion in the current fiscal, more or less in sync with the previous year, Assocham said.