India’s disappointing export numbers for July, several hours before its release on Tuesday, showed a month-on-month decline of 12% from the $40 billion figure posted in June, according to a report for New Delhi-based US retailers. The major buyer was preparing the outline. The next several months equate to a scary new world for Indian exporters of clothing and home goods. “There will be a huge improvement,” said Nagesh Sharma, a buyer in South Asia, the Middle East and Africa for US retailers. “Large retailers are usually delaying shipments by six months.”
Caught between high inflation and weak growth not seen since the 1970s that pushed the US into a mild technological recession, the party for American consumers is over. Indian exporters will also experience hangovers as they are more dependent on the US than India’s regional competitors, and have benefited immensely from the US expansion from massive stimulus packages by the Donald Trump and Joe Biden administrations. Generous income support prompted record levels of discretionary purchases of goods by people confined to their homes during the pandemic. Now, Sharma told me, a client in the US asked his firm to hold one million pieces that were ready to ship in April by November.
Just-in-time inventory management has been temporarily abandoned and replaced by a strategy of forcing sellers in developing countries to delay and share warehouse orders, even losses. While the stock market in the US has penalized stocks of large US-listed retailers, one of the largest has passed the pain by asking its large suppliers to ‘contribute’ to help about 10% of its annual sales. has decided. Compensation for damage caused by unsold goods. Americans and Europeans are now spending more on services such as travel and restaurants, which partly explains the long queues at airports in the US and Europe. There is such a shortage of airport staff that some US airports now have a $5,000 sign-on bonus for new fares.
India’s strong export performance in 2021 benefited from a once-in-a-century increase in US demand, a happy kind of black swan. Freight ships were backlogged for weeks simultaneously at the port of Los Angeles and freight rates increased tenfold as people moved to work from home and spent on equipment and furniture.
As evidenced by weak Purchasing Managers’ Index (PMI) numbers across Asia and the US’s decline in GDP this week, what already seems remote as a historical epic. On Monday, India’s own PMI print for July showed that the sub-category of new export orders declined to 52.6 from 54.9 in June. India is particularly vulnerable because we are more dependent on the US.
As Abhishek Kumar and Divya Srinivasan of the Center for Social and Economic Progress recently observed on these pages, goods exports from India to the US grew by 43% in FY 2021-22. Our modest exports of jewelery and leather products to the rest of the world actually declined in 2021, compared to much of 2019 pre-pandemic. Exports of these products to the US, in contrast, grew by 50% and 20%, respectively. , In other words, huge US stimulus packages in 2020 and 2021 became a Marshall plan to revive Indian labour-intensive exporters, albeit unintentionally. It is a reminder of how deep India’s ties with American businesses are, a point of consideration for our sharp anti-American commentators who defended Russia’s invasion of Ukraine. Contrary to our commentary, Indian exporters are highly inclined towards the US. In part, this is because both the previous government and the current government have done a poor job of joining trade groups such as the Regional Comprehensive Economic Partnership or signing free trade agreements, such as with the European Union, for which we have It’s been discussed over and over again over the years. The main problem is that India has largely missed itself in global supply chains, as outlined in Amita Batra’s India’s Trade Policy in the 21st Century. Buyer Nagesh Sharma of all countries points to Myanmar as an example of a country that has proven adept at finding new markets in North Asia. He blames the fragmented nature and small size of our exporters: “Their thinking is not so global.”
Much of the recent discussion of the rupee-dollar exchange rate has swung like this. Many of the world’s currencies have depreciated against the US dollar this year without any alarming headlines in their media. As JP Morgan economist Sajid Chinoy has repeatedly pointed out, India’s year of high growth, its export performance and the competitive rupee all have a strong correlation.
While it is true that the dynamic services export sector and foreign portfolio inflows have often put upward pressure on the rupee, the Reserve Bank of India’s currency management in recent months has overlooked the boon that a weaker rupee will be for exporters. I can’t help thinking that a nominee or two from labor intensive industries should be appointed as ambassadors for North Block as well as RBI, both of which are far from the competitive realities that our exporters face. .
The high demand we saw from the US last year will not return anytime soon. To paraphrase Oscar Wilde: The world’s largest economy can be considered a misfortune to face a steep decline in export trade; It’s some other people’s turn to look like a caretaker.
Rahul Jacob is a Mint columnist and a former foreign correspondent for the Financial Times.
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