Exports set to maintain high growth, exporters run out of capacity to meet orders from UK & US

NEW DELHI: India’s merchandise exports in August are likely to have sustained the high growth of the previous month, with apparel exporters saying they ran out of capacity to meet the orders from the US and the UK. Commerce secretary S R Rao told ET that the numbers suggest that the export figure in August is likely to be as impressive as in July, when the country saw an 11.6% growth in exports.


“Exports have continued to do well even in August. We are likely to see a higher growth,” Rao said. Rao said the increase in exports will help the government bring down the trade deficit to less than that of last fiscal’s $191 billion. Trade deficit in the current fiscal has already touched $61 billion. Large apparel exporters have seen an over 30% growth in shipments in August, against a 20% growth in July.

“We have no capacities at the moment, else we would have sold more. August growth is over 30% for us. We are trying to build more capacities as the orders for October and December are much higher,” said Sudhir Dhingra, chairman and managing director of Gurgaon-based apparel exporter Orient Craft. The rapid decline in the value of the rupee over the past few months has given an edge to sectors like apparel, which rely less on imported content.

Besides, the recent government efforts to boost exports by measures such interest subvention have also benefitted the apparel industry. “We are now able to compete against Bangladesh and China,” Dhingra said. Although sluggish, the recovery in the US and Euro zone has also helped the Indian apparel industry. The US gross domestic product grew 2.5% in the quarter to June, higher than the 1.7% growth initially estimated.

The Euro zone edged out of recession after nearly two years, growing 0.3% in the second quarter of 2013. “The recovery in the US during the last few months has resulted in a 25% rise in our order book for spring demand,” said Amit N Goyal, managing director at Sarju International, an apparel exporter to the US and Europe. Rafeeque Ahmed, chairman of Farida Group, said he saw an 18-20% growth in exports in July and August.

“Demand from the US and Europe improved tremendously, specially for footwear. For us, the UK recorded a 20% growth and Germany 12% growth,” Ahmed said. Engineering exports also expected to benefit from these developments, turning positive in August against a 1.5% decline in July. “August was better, we may see a positive number, but September will be bad due to an 8% increase in steel prices,” said Aman Chadha, managing director at Indo Nikko Industries, an exporter of automotive components and bearings to the US and the EU.

With high import content and high domestic input prices, engineering exports will take long to show a recovery at the pace of sectors like apparel and leather, he added.