Domestic bottlenecks that have led to a pile-up of stalled projects contribute to half of the slowdown in India’s exports, according to estimates by HSBC.
In a note titled Finding the cure for ailing exports, the bank estimates that 60% of the slowdown in export growth of goods is led by domestic bottlenecks followed by a larger deceleration in global trade.
Even for services exports, 50% of the slowdown in growth comes from stalled projects.
India’s exports grew 4.6% in September after a two-month decline.
Debt quality index shows weakness
Leveraged Indian companies with high debt are not yet out of the woods in terms of servicing their borrowings, as shown by the CARE Ratings Debt Quality Index.
After four months of stability, the index fell to 90.93 in September from 91.16 in August, indicating that quality of debt is still vulnerable.
In August, the index had risen to a seven-month high.
The rating agency’s data set comprises 1,581 firms from its portfolio of 2,980 companies as of March 2012.
Domestic consumption of gems and jewellery wanes
India’s gems and jewellery imports saw a remarkable slowdown in the first five months of fiscal year 2017 (April-August).
On the other hand, exports exceeded imports.
A Kotak Institutional Equities Research report suggests that given the low gap between imports and exports (adjusting for value addition), “net” consumption of gems and jewellery has been negligible when compared with levels in the past.
A combination of factors such as positive real interest rates, thrust on financial inclusion and crackdown on black money can be attributed to slowdown in demand for valuables, it added.