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Chairman

Mr. Mahesh Desai

This meeting delivered some results and the RBI caution listing date was postponed to 31 March 2019; the ‘pre-import’ condition was dropped vide DGFT Notification No.53 dated 10 January 2019 and efforts are now being made to educate the exporters with respect to using the UCO Bank mode for exports to Iran. I hope to continue this dialogue further during my meetings in the month of February 2019 when, among others, the Board of Trade Meeting is also scheduled.

 

As I write, the Interim Budget 2019-20 has been presented by the Union Finance Minister, MrPiyush Goyal. The fiscal deficit is expected to be around 3.4 percent of the GDP while the first step towards a Universal Basic Income (UBI) Scheme for smaller farmers has been initiated. Similarly, income tax exemption has been provided for incomes up to Rs5 lakh per annum. I understand that all the tax-related proposals are likely to be ratified when a full budget is presented by the newly-elected government in July 2019.

 

There is no doubt now that the pace of engineering exports growth has slowed down considerably and the third quarter has shown negative growth. While detailed analysis of the trend is provided in the following pages, three critical segments have held back the potential that is there: primary iron and steel exports; copper and copper products exports; and zinc and zinc products exports. Of the three, the first two are the result of market imperfections and an exogenous factor respectively. EEPC India has been continuously hammering the point that while most segments of engineering face the vagaries of the market, domestic steel prices are not ‘market determined,’ resulting in higher prices making downstream value added uncompetitive in global markets. The other impact, now that the international steel prices have fallen, is that the Indian steel majors are catering only to the domestic sector, cutting back on their exports.

 

With respect to copper products exports, the closure of the Tuticorin plant has led to 40 percent drop in production of copper products while imports of refined products have increased. From a net exporter of refined copper, we have now become a net importer. With respect to zinc, there was a fall in domestic production, which hopefully is a short-term phenomenon. Clearly, we need to work out alternatives and some of the suggestions that we have been making to the government, if implemented, can help to some extent in the promotion of the rest of the engineering products. These are products where domestic production and external conditions do not face such negative externalities.

 

On our part, we will continue to promote engineering goods and the eighth edition of the International Engineering Sourcing Show, IESS VIII, scheduled over 14-16 March 2019, will be one such effort to give a major thrust to the promotion of sourcing of engineering products from India, showcasing technological advancement and future technologies, especially for our MSME units.

 

Malaysia is the Partner Country in IESS VIII being held in Chennai. Malaysia, with Asia’s eighth best and the world’s 25th best overall infrastructure, Southeast Asia’s fourth-largest and world’s 38th-largest economy, has one of the best economic records in Asia since its independence with its GDP growing at an average of 6.5 percent per annum for almost 50 years.

 

As both Malaysia and India are moving towards a technology-driven automotive industry equipped with shared mobility, connectivity, electrification, and autonomous driving, this is the most appropriate time for Malaysia Automotive, Robotics and IoT Institute (MARii) to play a lead role to participate in a global forum like IESS.

 

Malaysia’s participation is expected to be a major game changer at IESS 2019, anticipating greater collaborations between MARii and Indian companies and the creation of a technology ecosystem between the two countries.

 

I urge our readers to join us in IESS VIII and benefit from the bouquet of the programmes we are going to present at this mega show.

 

The beginning of the current fiscal 2021-22 has not been very positive for the Indian economy. As the second wave of the pandemic ravaged the country, many states were compelled to bring in intense lockdown-like restrictions. This led to the closure of many businesses resulting in loss of livelihoods. Consequently there was a significant drop in income and domestic demand. However, while the economy at the domestic front dwindled, exports emerged as a silver lining in the month of April. India’s exports during the month of April 2021 exhibited robust growth in three digits as exports jumped to $7.6 billion against $2.3 billion last April due to the low base effect. While the figures for May are expected to be lower due to the second wave, the robust growth of March and April has created a lot of optimism among the exporting community. Growth surge was witnessed in almost all segments including machinery and ferrous and non-ferrous metals. Growth in exports was witnessed in almost all destinations, especially East Asia.

While last year April witnessed depreciating global demand due to the pandemic’s first wave-induced lockdowns across the world, this year global demand has improved markedly, mainly led by recovery in East Asia, Western Europe, and the US. A recent report by UNCTAD specified that the trade in goods in the first three months of 2021 was higher than the pre-pandemic levels. According to new estimates by the WTO, the volume of merchandise trade expected to increase by 8 percent in 2021 after declining by 5.3 percent in 2020. However the growth rate will slow to 4 percent in 2022. Despite the positive short-term outlook, in the long term trade growth will be affected by the uneven recovery across the world as cautioned by organisations like the WTO, World Economic Forum and UNCTAD. The global trade organisation has also cautioned the developed countries like the US and the EU members against their pre-pandemic level protective stance which had already led to shrinking global trade even before Covid. Along with open international markets WTO has specifically mentioned that an even rollout of vaccines across the globe will be necessary for sustainable growth of international markets.

The need for rapid vaccination is also true for India for sustainable recovery from the pandemic. In the absence of vaccines last year, the government had no choice but to impose strict lockdown to save lives. That decision was responsible for restricting the Covid curve to a large extent. The disastrous second wave has now come under control and vaccination rates have increased across the country, in fact the Union government’s announcement for free vaccination drive in the second half of June is bound to accelerate the pace of vaccination further especially in the rural areas. However, expert virologists have already predicted repeated pandemic waves even after vaccination, which can further derail India’s recovery. Hence experts believe that the Centre and states should cooperate to form a robust policy, which will help the country to move along a sustainable growth path. Sustainable economic growth will be crucial to keep up the momentum of exports growth in the long run.

Along with sustainable economic policies, it is also important for Indian exporters to penetrate new markets and find new opportunities in the traditional ones. Engineering exhibitions and shows across the world create a good opportunity for the exporters to explore new markets and products. However, the pandemic has made physical exhibitions impossible which became a concern for the exporting community. I am happy to mention here that the virtual expos organised by EEPC during this time has been able to fill the void to a large extent. In fact, EEPC India is soon going to organise an engineering partnership summit with our ASEAN partners to explore further market opportunities in that region. The exporting community strongly believes such initiatives along with the right policy mix from the government will be able to alleviate India’s economic issues in the long term.

On this positive note, I would end here. I sincerely hope that you enjoy this edition of the journal.

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