Exporters expect demand to pick up, wary of currency fluctuations

NEW DELHI - Indian exporters are optimistic about rise in demand in key markets such as the US and European Union (EU) in the coming months, although the spike in prices of raw material and an appreciating rupee continue to hurt margins.

About 64 percent of exporters’ current conditions are substantially better compared to the last six months, while 74 percent expect demand to improve further in the next six months, according to a survey by Federation of Indian Chambers of Commerce and Industry (FICCI).

The survey was conducted during September-October among 254 exporting firms from a wide geographical and sectoral spread and having a turnover ranging from Rs.50 lakh to Rs. 22,000 crore.

The companies represent sectors like automotive, food and food processing, marine products, gems and jewellery, handicrafts, fast moving consumer goods (FMCG), textiles, metal and metal products, heavy engineering, cement, paper, pharmaceuticals and chemicals, wood and wood products and information technology (IT) software.

The survey respondents indicated that buying activity in the international market had picked up in recent times.

Importers of gems and jewellery, handicrafts and textiles in US and EU are stocking up in the expectation of better demand in their home markets in light of the upcoming festive season, said the report from FICCI.

Among other indicators of a spike in demand were shipments of metal products to certain parts of Europe rising, sea food exports to the north American region gathering pace and an increase in house ware and furniture exports to markets of Africa and the Middle East.

FICCI said the companies too had chalked out aggressive sales strategies like appointing new distributors, building stock points in destination markets and increasing product advertisements.

However, the recent rise of the rupee vis-a-vis the US dollar, was eating into the margins of exporters, who were also struggling to manage rising input costs and intense competition from local players in the target markets.

“There is an apprehension that with the interest rate cycle moving upwards, tightening of interest rates would happen in the next few months. And as this happens, exporters will have to take steps to manage this additional costs,” said the report.