Foreign Buyers Switch From China to India, Says President of Indian Exporters' Organization
© AP Photo / Saurabh DasIndian Prime Minister Narendra Modi, center, unveils the logo of 'Make in India' initiative in New Delhi, India, Sept. 25, 2014.
© AP Photo / Saurabh Das
As inflation has plagued economies, global trade is facing headwinds. The World Trade Organization (WTO) revised its forecast for international trade from 4.7% to 3% in April 2022, and experts expect a further downward revision in October.
Sputnik spoke with A. Sakthivel, president of the Federation of Indian Exporters Organization, about the future of India's exports.
Sputnik: As Western economies are slowing down, what would be the possible impact on India's exports?
A. Sakthivel: I have [met with] buyers in Europe and the US -- they have a positive attitude towards India. Last year, we achieved a remarkable 33% growth. But this year, we may not get that 33%. We may get about 15%. So, we are expecting $470-475 billion in manufacturing exports this year.
Buyers are also [switching] from China to India, as China is becoming costlier and less reliable with its zero COVID-19 tolerance policy, and anti-China sentiments are gaining ground daily. Many orders for low-value products, which has been a virtual monopoly of China, are now coming to India.
And again, there is a production-linked scheme and other schemes the Indian government has introduced. With all these factors, our exports will definitely increase. For example, we were importing mobile phones to $25 billion. Now we export mobile phones worth around $5 billion and our imports have come down from $25 billion to $4 billion.
Production-Linked Scheme (PLI) also comes to the textile sector. Exports of our man-made fiber garments and technical textiles will increase. For example, in textile, we cater only the summer garments. Now, with the PLI scheme coming in and starting manufacturing of man-made fiber and technical textiles, our export of winter garments will also increase.
A similar case is with the electronic industry, where we are witnessing growth in exports.
Another significant plus point is that we have already signed a Free Trade Agreement (FTA) with the UAE. Our exports to the UAE are already increasing. The Australia-India Economic Cooperation and Trade Agreement has also been signed. Thus, our exports to Australia will also increase.
Our commerce minister is talking about signing an FTA with Canada, which will boost our exports. Also, the talks are ongoing to reach a trade deal with the Gulf countries. So, once these new trade deals are signed, our exports will definitely increase.
Sputnik: What do tensions in the Taiwan Strait imply for the Indian exporters?
A. Sakthivel: China-Taiwan tensions won't have much of an impact. With Taiwan, our trade is primarily in the semiconductor [sector]. So far, there is not much impact on importing semiconductors from Taiwan. The good news is that we are setting up a huge plant in Gujarat. Within a year, the Gujarat plant can supply 50 percent of our requirement.
Sputnik: What is the status of exports to Russia?
A. Sakthivel: If we see data from April, our exports to Russia are down by around 30 percent, primarily due to a lack of banking arrangements, and so was the challenge on the logistics front as well. On the other hand, India's imports from Russia have gone up due to the massive jump in crude oil and fertilizer supplies.
You see, Russia [is willing to continue trade with India], since imports from Europe have stopped due to the sanctions. So we have a lot of opportunities to utilize that [vacuum] in the Russian market.
Well, there are only two issues -- one in the logistics and the other payment issue. The payment issue is about to be sorted out. Both governments are also looking into the logistics issues.
We are very happy that the government is considering using the International North-South Trade Corridor route to reach Russia. The route reduces the voyage time and the cost.
Unfortunately, Indian banks are reluctant to negotiate any document when goods touch Iran, being a sanctioned country. So once these two issues get solved, we expect at least to start with about $5 billion in exports to Russia this year.
Sputnik: Has there been progress in rupee-ruble trade?
A. Sakthivel: Our government has identified the State Bank of India for trade with Russia, and Russia has to give its bank name. The Commerce Ministry said that within 15 days, it would be done.
Sputnik: There have been reports saying that exporters are opting for currencies other than the US dollar for their trade to minimize their risks of currency depreciation. Can you elaborate on this?
A. Sakthivel: It's not that we can choose. We can give the rate in rupees, but the buyers must be ready with their banks to accept rupee terms. People are already settling their trades in pounds, euros, or yuan; they can switch over to the rupee.
Sputnik: In the wake of the Reserve Bank of India introducing a rupee-denominated trade mechanism, do you think there will be a fall in transactions in the US dollar?
A. Sakthivel: People worldwide are forced to deal in the US dollar. But once our rupee mechanism starts taking place and with the buyers' support and also the buyers' bank support, we definitely will increase our rupee trade with other countries.
This will help us to increase our exports to countries facing acute foreign exchange shortages or those affected by [Western] sanctions. It is at the initial stage now. So now, our banks and counter banks in Europe and other states may like to deal in the rupee. With the US, it may not be easy to trade in rupees.