The country's exports in the first quarter of 2024–2025 might be impacted by the growing geopolitical tension as it is expected to affect global demand, according to the apex exporters group FIEO.
The ongoing conflict between Russia and Ukraine has created uncertainty throughout the world, which has affected India's outbound exports in 2023–2024, which decreased by 3.11 percent to USD 437 billion. Additionally, imports fell by more than 8% to USD 677.24 billion.
"If things stay this way throughout the world, demand will be affected globally. The demand downturn could be apparent in the first quarter's statistics, according to FIEO Director General Ajay Sahai.
In spite of all the difficulties, he said, freight rates are beginning to decline, which suggests that future demand may be affected. He issued a warning, saying that any further escalation of the current situation might have dire consequences for global commerce.
"High inflation and high interest rates, in addition to geopolitical uncertainties, are crucial reasons for demand slowdown," he stated, cautioning that certain advanced countries, such as Europe, may see greater slowdown.
Additionally, he stated that the value of the Indian rupee declined by just 1.3% between 2023 and 2024 compared to the 4.8% decline in the Chinese Yuan, the 6.3% decline in the Thai Baht, and the 7% decline in the Malaysian Ringgit.
In response to a question concerning the effects of the Israel-Iran conflict, he noted that several exporters in the engineering industry have reported a decline in the demand for items traveling through the United Arab Emirates and Iran. The director general recommended that the government provide exporters with some liquidity support.
"Goods offtake will be low due to the downturn in demand, which means that international customers will also take longer to make payments. Therefore, we need the money for a longer time. Exporters want help for interest subventions as well," stated Sahai.
He also requested that the interest equalization plan be continued. The Union Cabinet decided to allocate an extra Rs 2,500 crore on December 8, 2023, so that the initiative may continue till June 30.
During a time when the global economy is experiencing challenges, the program assists exporters from designated industries as well as all MSME manufacturers in obtaining rupee export credit at favorable rates. Under the "Interest Equalization Scheme for pre- and post-shipment rupee export credit," exporters are eligible for subsidies. "The rates should be enhanced to 3 percent and five per cent," he stated.
