Exports on upswing despite Covid surge

As the second wave of Covid rages in the country, one sector of the economy seems to be thriving despite all odds. And that is exports. The latest data for exports in March shows a 60 per cent increase over the same month last year. And Commerce Ministry officials are surprisingly upbeat about the outlook for 2021-22. This is despite the fact there was a 7 per cent contraction in exports in the last fiscal which was during the pandemic, when literally nothing was going right.

The last few months of that year, however, saw economic growth pick up in most sectors and exports has been no exception. These rose by 6 per cent in December, 0.1 per cent in January and then fell marginally by 0.3 per cent in February on a year on year basis. The spurt in March to $34.45 billion compared to the same month last year reflects the rise in global demand for goods as well as the ability of Indian export industries to raise output to meet the requirements.

At the same time, this positive perception needs to be tempered by looking more realistically at the data. The March increase is over the extremely low base of the same month in 2020. Exports had then fallen by about 34 per cent compared to March 2019, reaching only $21.49 billion. The dip was reflecting the effect of the virus that had caused a slowdown all over the world. The steep 60 per cent rise in March 2021 must be viewed in this larger context. Yet it cannot be denied that exports have shown a rising graph of exports on a month to month basis since January this year. From $27.45 billion then, the value of export rose to $34.45 billion in March, the highest ever in a single month.

So there is room for some cautious optimism on the export front. Overall, there was a dip of 7.4 per cent in fiscal 2020-21 as exports fell to $290.18 billion compared to $313.36 billion in the previous year. This level of decline was only to be accepted in the year of the pandemic. It now has to be seen whether the steep rise in March will be sustained in the current fiscal.

For this to happen, the scenario related to the Covid surge will have to improve in the coming months. As of now, it is clear that the localised curfews and movement curbs in many parts of the country will affect export oriented production during April and May. Subsequently, however, much will depend on export strategies and policies. For instance, more incentives need to be given to agricultural exports. These continued to show a significant increase of 18 per cent during the last fiscal (April to February 2021) going counter to the decline in all other segments. Wheat, rice, soya meal, spices, sugar, raw cotton and vegetables were among the commodities that showed the highest growth. Wheat showed sharp growth largely due to government to government supplies to Afghanistan and Lebanon. In any case, it is clear that greater attention needs to be paid to agricultural storage and processing so that India can become a long-term player in global markets.

One of the problems facing agricultural exports is the curtailment of export commitments owing to domestic needs. To become a long term supplier in the market, buffer stocks need to be built up to ensure that export contracts are fulfilled in a timely manner.

The second issue related to the present scenario is the need for export industries to provide better wages and housing to migrant workers. This will prevent an exodus every time there are movement restrictions due to the pandemic. This is an issue being faced by most export hubs like Ludhiana and Jodhpur. In the case of the knitwear export centre, Tirupur, exporters have decided to provide incentives to workers to stay on during the temporary dislocation. In the long run, however, export industries will have to ensure better living conditions for workers along with providing a social safety net. This has to be long term strategy to sustain the workforce that comes from distance places.

Thirdly, even as the government is funding large scale investments in infrastructure, some of this must find its way to support the supply chain for exporters. Warehouses and storages in ports and airports as well as cold chains for agricultural and horticultural products are critically needed to ensure that exports can be sustained on a long term basis.

And finally, and perhaps most important, red tape needs to be cut down drastically. The latest scheme to provide support to exports known as the Remission of Duties and Taxes on Export Products (RoDTEP) scheme has come into effect since January this year but the rates have not yet been notified. The scheme replaced an earlier one that was successfully challenged by the US at the World Trade Organisation. The new one rebates taxes and duties for export industries. But in the absence of the new rates, it is difficult for exporters to specify pricing for their goods. These are critical issues that cannot be taken lightly by the Commerce Ministry as it has a direct impact on the country's export earnings.

Export industries are doing relatively well despite being buffeted by the Covid surge along with the entire gamut of trade and industry. But if given adequate support for tiding over these short term issues, this sector may ultimately achieve the optimistic projections being made for export growth in the current fiscal.