Reacting to the Trade Data for the month of September, 2022, Dr A Sakthivel, President, FIEO said that the slowdown in exports is a reflection of the toughening conditions of the global trade facing demand slowdown on account of high inventories, rising inflation, economies entering recession, high volatility in currencies and geopolitical tensions. The drop in commodity prices and restriction on some exports, with a view to stem the price increase in the domestic market, has also affected the growth numbers. He said that the decline in exports of engineering goods, apparels and textiles sectors is of particular concern as these sectors are key to huge employment. At the same time, the growth in exports of electronic goods on a sustained basis is a good sign besides growth in exports of gems & jewellery and petroleum products. While we should not draw solace from the fact that exports of most of the economies are facing contraction but this is a stark reality. President, FIEO said that the coming few months would be quite challenging unless the geopolitical situation improves drastically.
However, the decline in imports is encouraging despite the huge jump in import of coal and transport equipment. We hope that the energy prices will come down further to provide more relief to us on the trade deficit, opined FIEO Chief.
Dr Sakthivel added that in the current situation, the focus should be on providing liquidity at competitive cost to the export sector and therefore, RBI may consider opening export credit refinance facility to banks so as to encourage them to lend to the export sector with refinancing from RBI at the Repo Rate. Since the interest rates have moved upward and are now more than the pre-covid level, there is a strong case to restore the Interest Equalization support to 5% and 3% respectively as existed prior to the covid period. Moreover, the Government should look into the request of the export sector for continuing with IGST exemption on freight on exports, which lapsed on 30th September, 2022, particularly as the freight rates are still at much elevated level and GST on such freight will affect the liquidity of the exporters, though refundable later.