New Delhi: In synchronisation with Federation of Indian Export Organizations (FIEO) and the ministry of commerce, research firm Dun and Bradstreet has said that India is likely to miss its export target of $200 billion this fiscal as exporters are battling increase in credit risks amid slump in demand in the developed economies.
“Exporters are hit hard as credit risks are increasing besides demand is down significantly. We think in this scenario the country is likely to miss the export target of $200 billion this fiscal,” Dun & Bradstreet chief operating officer Kaushal Sampat said.
For the current financial year, trade deficit would be around $121 billion, where in exports would be about $182 billion and imports would be about $303 billion, Dun & Bradstreet said.
“He said the outlook is negative in this sector and exports are likely to dip further as there is a crisis of confidence,” he added.
Though the government has taken proactive and timely steps but there has been a significant dip in confidence level. “The steps taken in the stimulus package were in the right direction and these steps would provide liquidity into the system. But more needs to be done,” Sampat said.
The country’s exports, that posted 30.9 per cent growth in the initial six months of 2008-09, contracted by 12.1% in October, for the first time in the last five years.
The trend continued in November, when exports fell to $11.5 billion, from $12.7 billion a year ago, leaving a trade deficit of $10.1 billion.
Regarding layoffs, he said companies are cutting down excess manpower. Non performers are being asked to go and firms are trimming temporary staff. But there is no major layoffs and companies are not in a hiring mode.
The cut back in consumer spending and the decrease in household liquidity in the US are likely to continue in 2009, lowering the demand for products and services thereby increasing the likelihood of further business bankruptcies.
This trend has severe implications for Indian exporters in terms of loss of business and delayed payments as the US is the single largest export destination for Indian exporters, accounting for about 13% of the total Indian exports in FY’2008, Dun & Bradstreet said.
Sampat further said Indian businesses especially exporters should exercise abundant caution in all cross-border transactions considering the fact that there has been a significant increase in the number of companies filing for bankruptcy.
According to D&B the Chapter 11 filings for commercial businesses has increased from around 3,600 in 2006 to about 7,900, while chapter 7 filings increased from 11,400 to about 27,800 during the same period, a rise of 144%.
Under Chapter 11, a bankrupt company tries to reorganise its business in order to become profitable again. Its management continues to run day-to-day business operations but all significant business decisions must be approved by a bankruptcy court. In the case of Chapter 7, the company stops all operations and goes out of business.
A sectoral analysis shows that with increasing number of retail failures in the US, there was a direct bearing on apparel exporters from countries such as India. Meanwhile, the transportation space equipment manufacturing has witnessed over 2,000 bankruptcy filings in 2008 and this is likely to have an adverse impact on the auto-component sector in India.
Besides, over 100 bankruptcies were filed in the jewellery segment.
Meanwhile, FIEO has also said the country is likely to miss the export target, with total exports likely to stand at $175-180 billion.