India's exports are expected to decline by around 10 percent in FY21 and in case of a second wave of novel coronavirus, or COVID-19, outbreak, the contraction may reach 20 percent, according to Federation of Indian Export Organisations (FIEO).
"Initially, looking into the lockdown challenges and projected decline in global trade, we expected 20 percent decline in our exports. However, two days back, the WTO trade estimates for the second quarter puts the contraction only at 13 percent. We do not expect much improvement in demand," Sharad Kumar Saraf, President, FIEO, said.
It expects export recovery to be led by pharmaceuticals, medical and diagnostic equipment, technical textiles, agriculture and processed foods, plastics, chemicals and electronics. "Since domestic demand for petroleum products is extremely low, we may see increasing exports of petroleum as well for such companies to sustain in business," FIEO said in a press conference jointly addressed by Ajay Sahai, its DG and CEO.
FIEO has suggested a three-pronged strategy: a) Focusing on countries which are providing demand stimulus like the US, UK and many other advanced and emerging markets; b) Exploring countries having high anti-China sentiments: US, EU, Japan, South Korea, Australia, New Zealand and Canada; and c) Revisiting economies depending on crude and commodities exports as prices of such products are likely to be subdued.
Saraf said that boycotting Chinese goods may not be feasible as India is dependent on Chinese imports, but New Delhi should try to reduce its dependence on Chinese products.
"Much dependence on China can be reduced with short to long term plans. India has been able to reduce its import dependence in the mobile sector and the same can be replicated in other sectors of electronics, telecommunication and formulation of specialty in chemicals, etc," FIEO said.
On free trade agreements (FTA), it is of the view that India has not been able to gain much as these were not targeted towards its major markets. "We should focus on FTAs with our major export destinations like the US and EU. A BTIA (Bilateral Trade and Investment Agreement) with the EU has become all the more necessary as Vietnam has signed an FTA and Investment Protection Agreement with the EU," Saraf said.
India is competing with Vietnam in the EU market and such FTAs will give the latter an edge, particularly in apparel, leather goods, footwear, tea-coffee, furniture and electronics.
"Though India’s exports of electronics are not substantial, in the years to come, we see exponential growth in electronic imports due to a lot of investments flowing into the electronic sector led by attractive fiscal support," Saraf said.