Koteswara Rao VBSS

Covid-19 is ‘Blessing in Disguise for India’s Export Growth :

India’s lockdown has thrown millions out of work, disrupted big and small businesses and given a serious jolt to global economy and more so to the global trade. Estimates of the expected recovery in 2021 are equally uncertain, with outcomes depending largely on the duration of the outbreak and the effectiveness of the policy responses. India’s export in March 2020 were USD 21.41 b$ (Rs. 1,59,157.98 crore) as compared to 32.72 b$ (Rs. 2,27,318.25 crore ) in March 2019 with a downfall of 34.56%, This is the steepest decline since November 2015 . The decline in exports during the march 2020 has been mainly due
to the ongoing global slowdown, which got aggravated due to the lockdown of current Covid-19 crisis. It resulted in large scale disruptions in supply chains and demand resulting
in cancellation of orders. Major commodity groups which have recorded negative growth during March 2020 vis-à-vis March 2019 are Oil meals (-69.85%), Meat, dairy & poultry products (-45.48%), Engineering goods (-42.32%), Gems & jewellery (-41.05%), Leather & leather products (-36.78%), Plastic & Linoleum (-35.67%), RMG of all textiles (-34.91%), Carpet (-34.72%), Mica, Coal & other ores, minerals including processed minerals (-34.06%), Tea (-33.74%), Other cereals (-33.42%), Organic & inorganic chemicals (-32.88%), Cotton yarn/fabs./made-ups, Handloom products etc. (-32.16%), Petroleum products (-31.12%) and Rice (-28.28%).

Cumulative value of exports for the period April-March 2019-20 was USD 314.31 billion (Rs. 22,26,566.71 crore) as against USD 330.08 billion (Rs. 23,07,726.19 crore) during the period April-March 2018-19, registering a negative growth of (-) 4.78 per cent in Dollar terms (negative growth of (-) 3.52 per cent in Rupee terms).

Cumulative value of imports for the period April-March 2019-20 was USD 467.19 billion (Rs. 33,07,977.05 crore), as against USD 514.08 billion (Rs. 35,94,674.61 crore) during the period April-March 2018 19, registering a negative growth of (-) 9.12 per cent in Dollar terms.

Export Sectors badly hit by COVID are Agri Exports, Readymade Garments, Granite, Handcarts, Leather, Automobiles, Engineering, poultry industry, meat exports, dairy products, hand, Gems & Jewellery and various industrial components and services. Many ancillaries who are supplying to major companies under MSME units products were in deep troubles. Similarly, some of the major sectors had a big shock in domestic are hotel industry, restaurants, malls, cinema theatres, public transport, tourism, construction industry, real estates, Two wheeler and 4 wheeler sales and also platform business, street vendors and daily wagers. Apart from the major sectors, worst effected is MSMEs which is the backbone of our India economy and their direct contribution to exports are about 45% and providing employment to 120 million persons. This includes local and migrated labourers and now we are seeing the fate of migrated workers who are suffering without work and wages since lockdown. As the labourers are going back to their places,
availability of labour is going to be the biggest challenge to various sectors mainly to infrastructure.

Out of these sectors, the immediate bouncing sectors for Exports are PHARMA, HEALTH CARE, PERSONAL CARE, ALL AGRO COMMODITIES, FMCG, Supply Chain, Logistics, DIGITAL PRODUCTS,
e-commerce and home delivery, both by normal retail and by ecommerce companies and Online education etc. . Considering present situation, public may not prefer to go to market and Malls. Hence eCommerce is going to see a big boom as people prefer to get the things online and under these companies has got a green signal to operate under lockdown 3.0. Since other sectors are not on priority sectors, it may take time to pickup. However, there are various products required under value Chain for the above products will also take a leap in their supplies. For example packing materials, straps, polythene bags, labels etc., Every industry needs this though it may not look as essential items.

Before Corona (BC), export promotional activities use to be the responsible of various bodies under Ministry of Commerce are 28 Export Promotion Councils, 6 Boards and 3 Development Boards. These organisations take the Indian exporters as a delegation to foreign countries to participate in the Buyer Seller Meets & in international trade fairs under the Market Access Initiatives of Govt of India to promote exports. Their travel and the hall rental charges of setting up of stalls in international trade fairs will be offered at concessional prices / reimbursement as per the eligibility. Every council takes minimum 24 (2 per month) to maximum of 48 (4per month). Most of the exporters are tuned to this kind of travel to get their businesses.

Now under this lockdown situation, It is very difficult to adopt the old model of travelling to trade fairs and doing the business to get orders for exports. Most of the trade fairs
scheduled to happen during the first quarter of 2020-2021 has been cancelled. Now the International Trade fair organisers are also coming up with the technology of VIRTUAL TRADE FAIRS and councils are gearing up themselves to prepare their exporters to adopt the new techniques of Virtual Trade Fairs. In this case, exporters does’t require to apply for Visas, NO international travel, no hotel expenses. Exporters can sit in their Offices and put up a stall in the international trade fairs in Japan, Germany, USA or anywhere in the world and can interact with the buyer, who is also virtually visiting his stall. Exporters sitting
in his office can exchange the broachers and show the samples to the visitor to his stall and talk to the clients like online zoom meetings. This is one of the great change coming in international trade COVID pushing everyone to adopt the technologies.

Now COVID is pushing the international business big deals into B-2-B (Business to Business) as eCommerce online business. However, the B2C model of selling products directly to consumers online through eCommerce platform is also going to be rampant. Hence, exporters are get ready for the new changes in the trade transaction processes.

Foreign Trade Policy 2015-2020 which was to be expired on March 31st has been extended till March 2021 and all the schemes and benefits will remain same. the validity of various import-linked export schemes such as Duty Free Import Authorisation (DFIA) and Export Promotion Capital Goods (EPCG) have been extended by one year. Covid-19 serves opportunity for increasing India’s exports, should be seen as ‘blessing in disguise’. Indian industry, and India can emerge as a potential alternative choice for costefficient, quality products which are preferred from China, USA is also looking for allies outside of China. The world is thinking in this direction.Naturally, those countries that do not want to deal with China, will look at other countries with potential for quality products at reasonable price.

Exports of all major products i.e. rice, groundnut, processed food, meat, poultry, dairy and organic products has started from the mid of April and APEDA has put in a lot of efforts and issues related to transportation, curfew passes, and packaging units, which are being resolved. Government has adopted a “flexible approach” and is issuing digital copies of phytosanitary certificates for exports. Now required certifications were also started issuing online and customs also adopted accepting photocopies of original documents as original  documents can’t reach to importers / exporters in absence of international courier services. It is a good sign of easy of doing business without handling physical handling of documents.

WAY FORWARD to beat the COVID 2019:

Most of the major countries in the world has spend significant percentage of their GDP to fight against the COVID ranging from 2 percent to almost double digit numbers. Sofar, India has spent 1.7 trillion rupees which is equal to 0.8 percent of GDP. In fact states have been spending more than what centre has announced sofar. If the Union Govt is generous in contributing portion of GDP equals to 2 percent, many industries and exporters can be given a big relief. Even State Governments are spending more than their capacities to fight with COVID.

Govt should bring a revival pack for exporters to support farmers and exporters With shortage of food items in several countries due to supply chain disruptions, it is a good opportunity for export of agricultural and processed food items Cutting down import dependence, especially from China for Chemicals and various products.

Setting up committees to draw up strategies for sectors where China has vacated space and countries are looking to diversify suppliers.

Medical textiles, electronics, plastics and toys are some sectors whose exports can be promoted in the next three months as Phase 1, Gems and jewellery, pharmaceuticals and steel, in the next six months.

Each State Govts should also prepare their POST COVID ACTION PLAN to improve the exports from the respective states.

Dr. Koteswara Rao, VBSS
CEO, Global EXIM Institute.