As the lockdown continues, it is becoming increasingly clear that the effects of the COVID-19 pandemic will most likely spill over into the coming months. Even as the government and the Reserve Bank of India (RBI) implement a series of measures to bolster the economy, there are already signs of a significant negative impact, particularly in trade. More and more exporters fear that they may be seeing a long downward trend, as orders from primary markets like the US and Europe are canceled and supply chains are disrupted across the world. In fact, many exporters have expressed willingness to even brave the pandemic, asking the government for permission to restart operations with a 50% workforce, if necessary. As China restarts its economy, Indian exporters fear losing out markets while the lockdown continues. The Indian government’s decision to extend the known working environment of the current Foreign Trade Policy (FTP) is a good move. But India’s trade ecosystem is rapidly approaching a crossroads, where stakeholders might have to make a difficult choice -- between economic survival and public health and safety.
Trade Update
4TH APRIL
# 65
After sudden growth in February, exports are fast heading towards a lengthy period of contraction as buyers cancel major shipments in foreign-exchange (forex) earning sectors, fear exporters. “We expect contraction in March. With major economies continuing to see sharp rise in cases, the cumulative fall in demand would spill over into April, causing a bigger contraction,” Ajay Sahai, Director-General of the Federation of Indian Export Organisations, said.
Hit by the sudden lockdown and logistics disruption on top of a global slowdown, India’s exports sector is likely to face a nearly 10% dip this financial year and between 20-30% in the crucial month of March. “If the whole year was a period of challenges, this month has been a disaster with factories shut, orders cancelled by foreign clients and huge logistics disruptions hitting us,” said Sharad Kumar Saraf, President of the Federation of Indian Export Organisations.
Exporters have sought that they be allowed to restart operations with 50% staff, in order to help pay wages, prevent migrant laborers from returning to their hometowns and stop loss of market share to China. The petition to the government by exporters’ associations comes amid a 21-day nationwide lockdown. “Exporting units should be allowed to start operations with 50% labor force as it will help in paying wages, maintain social distance at their residence and above all, prevent loss of market to China,” said Ajay Sahai, Director-General of the Federation of Indian Export Organisations (FIEO).
Given the likelihood of repayment delays by small and medium enterprises following the 21-day lockdown implemented to contain the spread of coronavirus, digital lending startups in the country have begun upgrading their technological capabilities to enable borrowers to service their loans on time without any physical interface. “Due to the disruption caused by the current lockdown, we do see some of our clients facing temporary difficulties in repaying their loans,” said Alok Mittal, Managing Director and CEO of Indifi.
In a bid to accelerate the financial support to the real economy amid the improving COVID-19 situation in China, the China Banking and Insurance Regulatory Commission (CBIRC) issued a notice on supply chain finance on 26th March, highlighting a full spectrum of 17 guidelines to financial institutions and anchor corporates in the supply chain. “In view of the cash flow pressure faced by some enterprises in the upstream and downstream sectors of the industrial chain since the resumption of work and production, the notice puts forward specific measures to guide banking and insurance institutions to enhance financial support and services, facilitate the capital flow of the industrial chain, and enhance the overall effect of co-ordinated resumption of work and production across the industrial chain,” the CBIRC states.
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