Exports to remain under pressure in new year: India Ratings

MUMBAI: India’s export sector will continue to remain under pressure in the new year hit by depressed commodity prices and a sharp fall in the euro, India Ratings ( Ind-Ra) an arm of the global rating agency Fitch said.

“The nominal income growth of corporates in most exporting sectors will remain depressed, due to the deflationary impact of falling commodity prices ( World Bank non-energy price index fell by 17.4% yoy as of end November 2015). Also, most Indian corporates which have exposure to Europe may be unable to increase product prices to offset the decline in margins caused by the depreciation of the euro due to stiff competition from other Asian exporters,” the rating agency said.

India’s exports fell 16% in the 12 months ended November 2015. About three fourths of the decline is on account of a decline in exports of crude oil and its products and agri-commodities in line with the fall in the prices of these commodities.

“A sharp decline in commodity prices has depressed the prices of many intermediate and manufactured goods leading to a decline in the value of exported items,” Ind-Ra said.

Demand in Asia, OPEC and Africa have been hurt by falling commodity prices, moderating domestic demand and volatile exchange rates, though Europe and US are in a recovery mode, Ind-Ra said.