Sunday, August 23, 2009

Indian Exports Seek New Markets

Bloomberg reports:

“About 60 percent of our traditional export markets are in recession,” Sharma told reporters in New Delhi today. India will be looking to expand its markets to “make sure that our exports remain competitive,” he said.

The worst global recession since the Great Depression has cut demand for made-in-Asia goods. Flagging exports are forcing Indian companies in sectors such as jewelry, textiles and leather to cut production, weakening an economy expected by the central bank to expand at the slowest pace since 2003.

The Trade Ministry will announce more assistance for exporters in a policy statement on Aug. 27, Sharma said. India’s exports dropped 27.7 percent in June from a year earlier to $12.8 billion, the ninth consecutive monthly decline. Exports plunged 33.3 percent in March, the biggest fall on record, according to Bloomberg data going back to April 1995.

That's a pretty disastrous drop in exports for India.

August 27th will be an important day. I would advise paying close attention to the markets; it will be interesting to see how they react. India looks ready to diversify to new export markets. Does this represent a decline in confidence in the U.S. consumer (and dollar)?

India is also relying on trade agreements with other countries in a bid to bolster exports as the global recession drags on demand.

India last week signed a trade pact with the 10-member Association of Southeast Asian Nations, a move that may result in trade between the two increasing to as much as $60 billion from $47 billion last year.

The trade deal is “positive from two strategic perspectives: to counter the influence of China in Asean markets and to improve India’s negotiating capabilities at an international level,” said Rohini Malkani, an economist at Citigroup Inc.

Are these the new markets India will pursue? Will we see increased competition between China and India? Just how much money will the Indian Trade Ministry devote to developing these new trade markets?

All questions that will be answered in due time ... This is certainly a bold move by India, or at least it seems that way from this preliminary announcement. If this pays off for India, we could see other countries follow suit and decide to diversify in terms of who they export to. Namely, it will be interesting to see whether or not China responds to this with its own initiative in Southeast Asia.

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