Crisis-hit exporters to explore new markets

The demand crunch in developed countries spurred by the global economic crisis has forced Indian exporters to explore new markets. Exports to Latin America have doubled in the first half of the current fiscal compared to the previous year while shipments to African countries have increased almost by half, according to government figures. 

The trend would get strengthened in the coming years with continued policy support and play a significant role in helping exporters spread their risks, experts say. 

"Exporters comfort factor in doing business with the EU and the US took a beating after the global economic crisis slowed down growth in these markets," said KT Chacko, director, Indian Institute of Foreign Trade. This is primarily the reason why they started looking seriously at growing markets in South America and Africa. 

Exports to Latin America increased by 108% to $5 billion in April-September 2010 compared to the same period in 2009 while exports to Africa increased by 41% to $7 billion. The two regions share in India's total export also increased. 

"The business community has known about the possibilities in these countries for a long time. The fact that it has started making in-roads into Latin America and Africa is a reflection of the change in global situation," said Biswajit Dhar, director general, Research and Information System for developing countries. 

In 2009-10, when the global crisis was at its peak, India's exports to the EU and the US went down by close to 9% leading to a fall in the country's overall exports. While exports have started picking up since and are expected to touch $225 billion this year, the projected slow growth in the developed economies make new markets more attractive. 

"The advantage in the Latin American market is that you also get good margins there, pointed out Ajay Sahai," director general, Fieo. While the disaggregated sectoral growth figures are not available, sectors such as pharmaceuticals, engineering and organic chemicals have already started making a mark. 

The incentive given by the government to promote exports to new destinations has played a decisive role in the diversification process. "The 3% incentive has been the basic driver," Sahai said. The commerce department gives support to export niche products and target new markets which amount to 3% of the total value of exports. 

According to Dhar, India's diplomatic efforts in Africa to increase familiarity with Indian products has helped significantly. "Our missions have been very active and the India-Africa business summits are showing results," he said. 

Even as India focusses on new markets, it is continuing its efforts to increase its presence in the Asian market that accounts for more than half of its exports. Implementation of the free trade agreement with the ten member Asean countries last year and bilateral deals now being signed with individual members of the region are expected to give a boost to trade. It is also keeping China, its third largest trading partner in good humour, by engaging with the government and organising business-to-business meets. 

Chacko, however, said one should not disregard the West. "The EU and the US will remain our biggest markets," he said.

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