Domestic demand help handicraft exporters beat global slump

NEW DELHI: Robust domestic demand fueled by growing disposable incomes has set cash registers ringing at India's handicrafts industry, which is battling a slump in its main markets, the US and Europe, that account for three-fifths of its exports business.

Handicrafts exports slumped 40% to Rs 10,533 crore in 2010-11 from Rs 17,288 crore in 2006-07, prompting many handicraft exporters to rethink their business strategies to tap rising domestic demand.

“With economic growth and additional incomes, people are willing to spend on high-quality exquisite goods,” Export Promotion Council of Handicrafts executive director Rakesh Kumar told ET, adding that “the Indian market is evolving and many exporters have set up their retail outlets here and are doing good business.”

Companies now see a sizeable chunk of their future revenues coming from domestic sales. Starlite Overseas has been exporting intricate glass and metal items to the European Union for years, but is now opening stores in India after finding a market for products once considered too expensive. “Decorative items, especially of glass, and accessories like cigarette cases, hookahs, garden ornaments have seen a spurt in demand within the country. We are shifting focus from primarily exporting these products to looking inwards,” said Starlite director Punit Bansal.

With high unemployment and lower incomes in the EU and US, the demand for luxury items like handicrafts have taken a hit, said Kumar. “Domestic retail is expected to contribute as much as 25-30% of our total revenues this fiscal,” said OP Prahladka, chairman, Lion Picture and Frame Company Ltd, a medium-sized Kolkatabased handicrafts company.

Large handicraft export houses like Hitaishi KK Manufacturing have set up subsidiary companies exclusively for domestic operations. Other export houses too are contemplating setting up separate companies to focus on expanding their domestic presence. “It is difficult for an export house to foray into the domestic business in a big way as there are many administrative issues.

We have, therefore, set up a different company for this purpose,” said a company official in Hitaishi. Domestic demand has also lured new players into handicraft manufacturing, helping widen the range of products. Emergence of organised retail is also helping the trend. Many of these export houses have tieups with big brands, malls and store chains.

“We currently have our stores in seven prime locations. We have also tied up with Hometown in Mumbai, Delhi, Kolkata and are looking to expand,” said Prahladka.

The textile ministry has also approached the Tatas to allocate retail space for handicrafts in Westside stores.