TRADE UPDATE #71

Awaiting Lockdown 5.0

29/05/2020

As the COVID-19 pandemic continues to wreak havoc around the world, export data from some third-party websites are quite disturbing to look at. As per the CEIC, India saw the steepest fall in exports in April as against a group of 20-22 countries around the Asia & Oceanic region.

Earlier this month, the government announced several schemes under the Atma Nirbhar policy to support the trouble-ridden small and medium enterprises (SMEs) of the country. Even though the policy was overall welcomed by industry stakeholders, there are some concerns around its potential outcome. Additionally, even though the government gave a sovereign guarantee and announced a Rs. 3 lakh crore scheme for collateral-free loans for MSMEs to avail emergency credit from banks and NBFCs, financial institutions are not willing to take the lead, adding further to the industry’s woes. Additionally, these lenders have been given freedom to undertake their own due diligence before servicing MSMEs. Several stakeholders fear that financial institutions might use this power to their advantage and hence, government intervention is required to oversee this scheme.

With India now staring at Lockdown 5.0, one can only hope supply chain and other logistical companies resume work and help the exporters get back to business as soon as possible.


EXPORTS

At 60%, India's exports fall steepest in April

India’s export and import growth plunged to historical lows in April with year-on-year (y-o-y) export contraction of 60.3% compared to a decline of 34.6% in March. The country was hit the hardest among 22 countries as it grappled with disruptions in both domestic and global demand and lockdown-induced logistics challenges. This has put India in an awkward predicament as many other emerging nations were not hit as hard.


INTERNATIONAL TRADE

Explore new markets for success, Goyal to exporters

Union Minister Piyush Goyal on 28th May called upon the country’s exporters to be more competitive, provide quality products and explore new markets. Attending a ‘Digital Summit on Exports’ organized by the Confederation of Indian Industry (CII), the Union Minister for Commerce & Industry and Railways said the future of growth lay with industry and the private sector, with the government having a lesser role to play.


FINANCE

Banks free to do due diligence on guaranteed MSME loans

While the government has pledged full guarantee for up to 20% additional, collateral-free working capital loans under the Rs. 3-lakh-crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs, banks and shadow lenders have been given the flexibility to do their own due diligence and restrict advances below the stipulated limit on sound business principles. This leaves the scope for some lenders to exploit the situation unless the implementation of the scheme is monitored well by the government, according to a senior MSME industry executive


POLICY

‘Atma Nirbhar’ MSMEs: How govt measures will enable them for long-term sustainability, profitability

The Micro, Small, and Medium Enterprise (MSME) sector is the most vibrant and dynamic industrial sector, contributing significantly to the GDP and exports while employing around 40% of the Indian workforce. The Prime Minister’s speech emphasized that the MSME sector will act as the bedrock for economic revival. Intending to get the MSME sector back on its feet, the Prime Minister announced the MSME sector to be within the purview of the Atma-Nirbhar Bharat Abhiyan (ANBA).


SUPPLY CHAIN

Logistics to be game-changer for delivery businesses amid Covid if they make this cost-effective move

Logistics has suddenly been thrust to the centre of the COVID-19 pandemic across the globe. Things are no different in India. Logistics is no longer an activity that happens in the background, it is now the differentiator. The pandemic has brought both opportunities and challenges for startups. The strange thing is that both the challenge and the opportunity is logistics. For e-grocery, e-commerce, food delivery, and other on-demand service companies, this period might very well be the epochal moment when they can deeply integrate themselves into the daily lives of consumers


OTHER NEWS

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