The government’s new policies to gradually reopen the economy may have already hit their first roadblock, as case counts continue to surge in cities across the country. However, despite continuing lockdowns of various degrees in all parts of the country, India’s manufacturing and exports ecosystem have started to see some change. India’s PMI index for June stood at 47.2, compared to 30.8 and 27.4 in May and April, respectively. Union MSME Minister Nitin Gadkari also said the government is actively looking at ways to boost exports. Certain sectors have already received an impetus to resume exports, such as PPE, with the export ban on the sector being lifted. However, PPE exports will continue to be capped at 50 lakh units per month, even as a report by India Ratings warns that export recovery could be a long and protracted process. Certain sectors like handicrafts are already looking at significant drops in exports this year. For the most part, Indian exports and manufacturing are resuming activity gradually, and repairing the supply chain will play a big role in building momentum in this recovery.
Trade Update
5TH JULY
# 76
India’s manufacturing activity again contracted in June as regional lockdown extensions severely held back demand and labor logistic challenges remained, said the monthly IHS Markit India Manufacturing Purchasing Managers’s Index (PMI) survey on 1st July. Manufacturing PMI stood at 47.2 in June after May’s 30.8 and April’s historic low of 27.4. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
Union Minister Nitin Gadkari on 30th June said the government is looking at ways to boost India’s exports, and a presentation in this regard was made before the Prime Minister earlier this week. Addressing a virtual interactive session, the minister for MSME and Road Transport and Highways said a presentation on how to boost outward shipments was made before Prime Minister Narendra Modi on 29th June. Gadkari also said he is hopeful that a solution will be found in the next 4-6 months to address the issue of delay in payments to micro, small and medium enterprises.
The Centre has lifted the ban on export of personal protective equipment (PPE) but has put it under quantitative restrictions as shipments can not exceed 50 lakh units per month. According to a notification by the Directorate General of Foreign Trade, PPE medical coveralls for COVID-19 have been moved to the “restricted” list for exports from the “prohibited” list. It, however, said that all items that are part of PPE kits continue to be prohibited from exports.
Any prolonged disruption due to COVID-19 could materially impact credit and liquidity profiles of companies in export-dependent sectors such as textiles, gems and jewelry, and auto ancillaries, a report on 1st July said. Export recovery, which may begin from the second quarter, could get further delayed if the border standoff with China lingers on, an India Ratings report said, adding ability of export-oriented manufacturers to keep up supply will remain key to navigating the path to recovery.
India’s handicraft exports may fall 40% to about $2.1 billion in FY21 from $3.53 billion in the previous fiscal as demand from key markets in the US, the UK and EU countries continues to be low due to the COVID-19 crisis. “The handicrafts sector has felt the adverse effect of COVID-19 since February, when demand started to fall from many countries,” said Rakesh Kumar, Director-General, Export Promotion Council for Handicrafts (EPCH).