TRADE UPDATE #81

Tailwinds for Recovery

08/08/2020

India’s exports continue to outperform and beat expectations. Commerce Minister Piyush Goyal announced this week that the country’s exports in July had reached almost 90% of the level seen last year. Coming on the heels of the news of the MEIS being scrapped by the end of the year, this announcement will help restore confidence to exporters and industry stakeholders that have been worried about India’s pace of recovery. Goyal also said indicators of economic activity are reflecting recovery, welcome news against the specter of a slowdown in the Indian economy.

Even sectors such as textile, one of the worst-hit by the COVID-19 pandemic, have seen some recovery in prices, although a sustainable recovery is yet to be seen. There is also uncertainty for certain sectors such as rice because of geopolitical tensions and their effect on bilateral trade between India and some countries such as Iran. Fortunately, a high-level panel under the auspices of the 15th Finance Commission has made recommendations to improve the situation in these sectors.

India has achieved the dubious distinction of being the nation with the highest level of daily increase in coronavirus cases in the world. The country’s economy is not out of the woods yet, but the data suggests that its recovery is hopefully -- for now at least -- proceeding better than feared.


EXPORTS

India's July exports reach almost last year's level, says Piyush Goyal

Showing signs of significant improvement, Commerce and Industry Minister Piyush Goyal on 4th August said that India’s exports in July have reached almost the level of the corresponding month last year. He also said several indicators are reflecting that economic activities are reviving in the country. “Our exports have almost reached last year’s July level, with nearly 90% of our exports of July 2019 having come back. And, in fact if we were to remove the oil-related exports, where we are largely a small value adder...we are 95%+ on the revival of our exports,” he said.


POLICY

Production linked incentive scheme to be expanded to AC, furniture, leather sectors as MEIS wound up

The new scheme would replace the existing Merchandise Exports India Scheme (MEIS), introduced in April 2015, with the objective to promote manufacturing and exports of specified goods from India. But this scheme did not yield the desired result. Even with its liberal application across sectors, exports remained nearly stagnant, so the government now wants to wind it up by December. The liability under MEIS ballooned from Rs. 20,000 crore to about Rs. 45,000 crore in 2019-20, reaching an unsustainable level.


COMMODITY

Textile prices recovered in June, no sustainable recovery yet: Ind-Ra

Prices of textile products recovered broadly in June 2020 from the lows of April and May on account of gradual resumption of operations, India Ratings and Research said on 5th August. According to Ind-Ra, several textile companies have increased utilization of their respective capacities after the easing of lockdown restrictions since May 2020. “The inventory pile-up, lower channel liquidity, and labor migration in the context of subdued demand will continue to impact textile operations and exports in FY21,” the ratings agency said in a credit report on the textile sector.


POLICY

Tweak FCI's procurement strategies to boost rice exports: Expert panel

For boosting India’s non-basmati rice exports, the government needs to ensure that a higher pool of surplus rice is available to exporters by suitably modifying the Food Corporation of India’s (FCI) procurement strategies, a high-powered panel of experts on agriculture exports said. The panel was constituted by the 15th Finance Commission (FFC) to suggest measurable performance incentives for states to encourage agriculture exports as well as to promote crops that can help in high import substitution.


COMMODITY

Indian basmati rice and tea exporters to Iran facing uncertainty

Uncertainty looms over export of basmati rice and tea to Iran as the Central Bank of Iran has slowed down allocation of currency against which Iranian traders were buying these commodities from India. Indian basmati rice exporters said they are not entering into new contracts with Iranian importers so as to avoid any payment-related problems. Meanwhile, tea traders said export to Iran may stop within a month if the payment issue is not resolved.


OTHER NEWS

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