BackExporters on edge as raging covid in China derails trade
The covid-19 surge in China has triggered concern among Indian exporters as it may add to the softening of demand from Western countries
PremiumThe covid-19 surge in China has triggered concern among Indian exporters as it may add to the softening of demand from Western countries. China, India’s largest trading partner, reported an 11% decline in imports in November, and the latest outbreak could further hit exports of Indian goods.
While experts noted that the impact on Indian exports from the outbreak in China would not be immediately visible, as orders for the next quarter have been received, China’s decision to stop publishing daily covid-19 data has created significant uncertainty about the severity of the spread.
“The covid situation in China is a cause for concern both in terms of direct exports from India as also the uncertainty it creates in the short term," said Arun Garodia, chairman of the Engineering Export Promotion Council of India.
Engineering goods exports, accounting for nearly a fourth of the total merchandise exports, have been one of the hardest hit due to the slowing demand in China and the West. It recorded a decline for a fifth straight month in November.
The International Monetary Fund (IMF), in its Article 4 report released on Friday, cautioned that the emergence of more contagious covid-19, with a “medium likelihood" of occurrence, could impact India’s trade and growth.
“There is no delay as far as cargo movement is concerned. One thing that we need to bear in mind is that we are post-rush. Usually, in September and October, there is a huge rush. December, in any event, is a very light moment as far as container cargo is concerned. So, there is no stress on the system as of now," Indian National Shipowners Association (INSA) chief executive Anil Devli said.
A commerce department official pointed out that so far, pharma raw material imports have not been impacted, but it is keeping a close watch on the situation. “The respective divisions are keeping an eye out on the supply chain situation in view of the covid breakout in China," he said.
Ajay Sahai, director-general and CEO of the Federation of Indian Export Organisations, said, “The slowdown in China was quite visible for the past few months, affecting our exports of major products such as iron ore, mineral, cotton, aluminium, copper, etc. For tea, we will be compensating with increasing exports to Russia, particularly as Sri Lanka has also suffered a setback."
In value terms, tea exports to China fell over 28% between January and September to $8.29 million, compared with $11.6 million a year ago. Tea exporters dealing with the China market said the covid outbreak in China would add to the concerns already faced by tea traders.
“China is the largest tea consumer, but they are basically green tea consumers. In the past few years, black tea consumption in China has been gaining popularity and India happens to be a prominent black tea producer. Exporters have not yet complained about orders, but there is a fear of the impact on orders due to the covid outbreak in China," said Sujit Patra, secretary (exports) of the Indian Tea Association.
An exporter, requesting anonymity, said China is lucrative for tea but also challenging because of political tension and deliberate blocking of shipments due to alleged pesticide levels. This has had a negative impact on tea exports from India, the exporter said, adding that Indian companies are still getting orders from China.
Queries sent to the spokespeople for the ministries of commerce and industry, and finance were unanswered till press time.
Meanwhile, Indian drugmakers have reported no shortages, but have warned of a potential increase in the prices of key raw materials for drugs.
“There are no reports of shortages. It is too early to assess the situation, but the impact on Indian pharma manufacturing cannot be ruled out. But barring a few weeks during the first wave of covid-19, China has refrained from stopping the supply of pharma items. Prices could rise, particularly of APIs, key starting materials and solvents," said Uday Bhaskar, director general of Pharmexcil.
“Export orders are typically placed 3-4 months in advance and, currently, exporters’ order books are full. We will only be seeing covid’s impact by the first quarter of next fiscal. Engineering goods, agri-related commodities and iron ore could be hit," said Saket Dalmia, president of PHDCCI.
But India will comfortably cross the $450 billion export target by the fiscal-end, he said.
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