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‘Global supply chain constraints challenge Indian exports growth story’

🔴 David Sinate, chief general manager, Research & Analysis, India Exim Bank, spoke to The Indian Express about the problems Indian exporters are likely to face this season. Concerted efforts would be needed to ensure India retains its global competitiveness and exports growth momentum, he says.

Written by Parthasarathi Biswas | Pune |
Updated: December 14, 2021 12:00:57 pm
exim bank export growth global supply chainDavid Sinate, chief general manager, Research & Analysis, India Exim Bank.

Export-Import Bank of India (Exim Bank) is the leading financial institution engaged in financing, facilitating & promoting India’s International trade and investment. David Sinate, chief general manager, Research & Analysis, India Exim Bank, spoke to The Indian Express about the problems Indian exporters are likely to face this season. Excerpts from an interview.

Would global supply chain constraints, especially the logistic price rise and non-availability of containers be a dampener to India’s export growth story? If yes, which commodities would be hit more?

International transportation of goods, especially through ships remains a major challenge to export growth. While global trade in goods surged past pre-pandemic levels, the availability of ships and containers fell due to pandemic-related interruptions, creating an imbalance. This has resulted in a dramatic rise in shipping rates. This is a global phenomenon. The container shortage is also leading to congestion and increased processing time at various Indian ports. Over the medium term, the shortage of containers, frequent shutouts by the shipping lines and exorbitant freight rates are expected to challenge the rise in exports.

Indian exporters are facing major delays in their shipments and consequent liquidity issues as they have to wait longer to receive payment for exported goods. Some low-value export items that are exported in high volumes, via ship or ship-to-air, such as granite tiles, tea, rice, and furniture, have been impacted the most. Notwithstanding the above concerns, India’s export performance over the last three quarters of this financial year has been relatively strong. Concerted efforts would be needed to ensure India retains its global competitiveness and exports growth momentum.

Most exporters are wary about the increased cost of logistics. What does your interaction or studies talk about this? Does your bank have any schemes or suggestions to offset the same?

India Exim Bank’s study ‘Impact of Covid-19 on India’s International Trade: Strategies and Policy Perspective’ has pointed out that the shipping industry throughout the world has been facing inventory and space issues along with reduced available capacity, congestion at ports and increased costs due to the Covid-19 pandemic. Indian exporters are not getting container bookings and allotment of containers in time and are unable to supply goods in reasonable time frames as committed to international buyers, thereby resulting in decreased sales cycles and losses. A long-term solution would be to increase the capacity of Indian Shipping for India’s Trade.

Exim Bank’s study suggests that there is an increased need for automation and digitisation of India’s ports. While India’s ports and shipping are way behind many developed countries in automation, Covid-19 has highlighted the need for speedy action on this front. One suggestion in this regard is the use of radio-frequency identification (RFID) tags for easy tracking and identification of export consignments along with automation of logistic clearances and payment systems.

Exports, especially that of agri commodities, have been a saviour even during the Covid time. Are there special schemes to boost or increase the same? Which countries do you see as a potential new market for Indian commodities?

Agriculture trade policies in India objectively have been emphasising raising farm output, aiming at achieving self-sufficiency, reducing import dependency and ensuring food security. Several support programmes have been designed and implemented by the Indian government. To promote agricultural exports, the government has introduced a comprehensive Agriculture Export Policy (AEP) in the year 2018, with a vision to “harness export potential of Indian agriculture, through suitable policy instruments; to make India a global power in agriculture and raise farmers’ income.”

The AEP suggests measures to address the varied logistical bottlenecks faced by the agricultural sector through the newly formed logistic division. Under AEP, several unique product-district clusters have been identified for export promotion.

The government has recently introduced a production-linked incentive scheme for the food processing industry (PLISFPI) to support the creation of global food manufacturing champions. To further strengthen and support the agricultural sector, several initiatives have been introduced under the Atma Nirbhar Bharat Abhiyan, including Agriculture Infrastructure Fund (AIF), Pradhan Mantri Matsya Sampada Yojana (PMMSY), scheme for Formalisation of Micro Food Enterprises (MFE).

For the agriculture and allied products exported from India, USA was the largest export destination with estimated exports of US$ 4.8 billion during 2020-21 and China was the second-largest with estimated exports of US$ 3.7 billion. Other major export destinations in 2020-21 were Bangladesh, UAE, Vietnam and Saudi Arabia.

Some of India’s traditional markets like Afghanistan, Iran have had problems with line of credit. How will this affect our exports?

Afghanistan and Iran are not among India’s top export destinations. lines of credit are usually extended at the behest of the Indian government with geo-political-strategic considerations. There are no operational lines of credit to these countries at present, and as such, we do not expect any impact of this on India’s exports.

Do you feel the rise of Omicron might affect exports?

With increased coverage of Covid-19 vaccinations globally, better healthcare infrastructure and preparedness of most countries, and reduced severity of the variant in terms of its infection, the rise of Omicron is not expected to have any major impact on exports in the current scenario.

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