Export Decline Due to Coronavirus, Recovery May Take Long
India’s trading data is painting a very gloomy picture. It’s exports are down 1.9% and import is down by 8%.
Bad news for the economy exports decline for the sixth consecutive month.
Our trading data is painting a very gloomy picture. If you look at the cumulative data of 10 months in the previous financial year (April-January), then our Exports are down by 1.9% and import is down by 8%. According to data, 21 out of 30 export items have taken a hit while 17 out of 30 import items have taken a hit.
Is a Quick Recovery Possible?
Forget recovery, this gloom is going to continue for a while, according to me. According to the stock market indications of the previous week, global trade and GDP will be in a bad state. This is the gloom that we need to tackle.
Export Sectors Will Take a Hit Because of Coronavirus
There are two factors which we need to closely watch before we can predict a recovery in export. One is the coronavirus, the effect of which is evident, the other concerns the marquee export sector i.e. pharma. When it comes to pharma, we have to hit the panic button at the slightest of change. We have a huge share in the US pharmacy market.
So, no one knows what the effect of coronavirus on pharma is going to be. But it is certain that trade will slump because of it. So this is a big reason why trade will take a hit.
40% of the World's Countries Likely to Witness Civil Unrest but Will This Impact Trade?
There was a CNBC report according to which, civil unrest which was only limited to a few countries last year is predicted to spread across 40% of the countries worldwide. Some of the countries where a civil unrest is likely, also happen to be our trading partners.
If civil unrest increases in these countries, then it is bad news for our export sector. I talked to a few exporters who explained how trade is affected during a civil unrest. Exporters provide all the materials on a 20% down-payment rate. But during a civil unrest, they need a 100% advance payment because they can't afford the risk. This leads to several orders being cancelled.
To compensate for that, we focus on markets where there is no unrest. So when so many exporters target a small pool, we have to sacrifice margin. So both, margin decline and cancellation of orders is bad.
So two reasons - civil unrests spreading worldwide and coronavirus whose impact is unknown and the current data according to which manufacturing contraction is at a record level in China. There has never been so much contraction in China before. China is our second biggest trading partner. Coronavirus outbreak in China and civil unrest in Saudi, Russia and Hong Kong indicate no positive sign for our economy recovering. There is no surety as to how long this sluggish performance will go on. Export and growth is directly linked to quality job creation.
Revival in export is necessary else it will affect job creation.
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