Export credit falls 39.2% as global demand declines

“Globally, sentiments are weak which has impacted the demand (for Indian products). When there is no demand, export financing is bound to have a negative growth,” said a banker.

Merchandise exports grew by 8.51 per cent to $369.25 billion during April-January 2022-23. (Getty image)

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Export financing by domestic banks witnessed a contraction in the first 10 months of fiscal 2023 as demand for Indian goods declined amid global slowdown and uncertainty over Russia-Ukraine war.

The latest data from the Reserve Bank of India (RBI) showed the growth in export financing dropped by 39.2 per cent to Rs 14,390 crore as at January 27, 2023 from Rs 23,681 crore as at March 25, 2022. On a year-on-year basis, the fall is 41.4 per cent. In April-October 2022, the drop in export financing was 28 per cent.

“Globally, sentiments are weak which has impacted the demand (for Indian products). When there is no demand, export financing is bound to have a negative growth,” said a banker.

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The country’s merchandise exports grew by 8.51 per cent to $369.25 billion during April-January 2022-23, as against $340.28 billion during April-January 2021-22. The year-on-year growth in merchandise exports in April-January 2021-22 period was 46.73 per cent over the same period of 2020-21. However, exports fell by 6.58 per cent in the month of January 2023.

The Economic Survey 2022-23 said that due to aggressive and synchronised monetary tightening, global economic growth has started to slow, and so has world trade. As per United Nations Conference on Trade and Development’s (UNCTAD) latest global trade update, global trade growth turned negative during the second half of 2022, it said.

Geopolitical frictions, persisting inflationary pressures, and subdued demand are expected to suppress global trade further in 2023. This is likely to affect many countries, including India, with the prospects of sluggish exports continuing into FY24, compared to the promise shown at the beginning of the current year, the survey showed.

“The hikes in interest rates by a majority of the central banks across the world has diminished the purchasing power of people. Consumers across the world are postponing their purchases, which has resulted in faltering demand for (Indian) goods,” said another banker.

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Banks extend export credit in the form of working capital loans – pre-shipment and post-shipment finance.