Post Covid19: New Export Opportunities, Dynamic Reshaping of Value Chain and Future Risks

Today’s Foreign Trade Policy (FTP) merely implements the 1957 Recommendations of V.L.D’Souza’s Export Promotion Committee in different titles and formats and FTP announcements always remained as a ceremony or exercise related with providing tax credits to the exporters. But the need of the hour is to defend and extend the gain in the export and import through fair trade.

When the global market is stressed about corona, the Chinese exporters are busy in supplying goods to the world. But world does not know, where they are supplying. The importing countries either suspect or do not want to deal at least for now with China.  An argument is placed that since China controls global capacities of many industries, it would be difficult to source the goods from any other destination. The major factor to be kept in mind is that the market will have natural and additional caution on spending post Covid19. The need based consumption will not decline but expenditure relating to induced demands will decline. What is the percentage of such decline in consumption? It is substantial.

India’s major exporting destinations, Europe and USA face a serious crisis due to unemployment level, which is close to 33 million in both the places. UK recession is compared to the great frost of 1709. India has significant exports and inward foreign remittances with the twin-shocked economies (decline in oil price and pandemic). India could become another China to ASEAN economies but in its own way.  A negative note, the traditional Indian goods consumed by NRI (28 Million) will be under stress in most of the destinations due to reduction in salary, unemployment and returning to India.  

German court has just ordered a judgment against European Central Bank (ECB) on the purchase of bonds. US Banks have refused to lend European firms in the near future. The financial compliance issues of Latvian Bank ABLV and Danske Bank are the symptoms relating to credit worthiness.  Similar examples available on other continents reveal difficult stories. This is a bell weather to the ECGC on issuing guarantee for exports during and post Covid19. On the other hand, RBI may need to closely watch on receivables.  Will NPA of exporters require new look on policies?

Due to the disruption of travel, exporters may not be able to undertake export marketing in short term for sure but may do it in a limited manner in the future based on digital immunity passport. The cross border movement of payment could merely fly based on long-term reputation and relationships between exporter and importer. This is going to play vital role in short and medium term.  A big question is that, whether small and medium exporters will get affected? No, the platform companies such as Amazon, Flipkart, Reliance Jio Mart, etc will evolve a new type of export pattern.  Commerce Ministry may require revisiting its budget, as some of its past allocations may not be relevant in present export market condition. 

Indian exports will have peculiar advantage in US and EU markets.  Both EU and USA prefers to import specific goods from specific destinations. Due to the Covid19 Pandemic, such existing trade partners might not be able to supply or satisfy the requirements. Though India was not present in such specific market segments previously, the current scenario offers a lucrative opportunity to build new market and new product matrix. Example, Netherlands supply of fruits and vegetables to Saudi Arabia, Kuwait, UAE, Oman and Qatar was disrupted during this pandemic [Market size 15,000 Ton]. India could export most of the goods; it has ability to prepare supply in short duration to cater global markets. It is imperative for India to first identify the intermediate and finished products that are in short supply in importing destinations. Establishing support for expedite supply chain is essential. Example Europe might have tourism related consumption of goods, which will be in distress but French and Dutch are determined to push new green deal and it will provide new opportunity for Indian exports. The insights on dynamic reshaping of value chain of each product and services could suggest where Bharat can position in new global market and order.