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India’s exports to take a hit as Qatar crisis deepens

July 1, 2017 Agriculture, Chemicals, Cosmetics, Exports, Imports, Paint, Plastic & Rubber, Soap and Detergent

Indian exporters have started facing the heat from Qatar’s recent diplomatic crisis with Arab states — Saudi Arabia, Bahrain, the United Arab Emirates and Egypt.

Exporters foresee severe short-term challenges related to logistical and banking issues.

“There are some short-term challenges arising out of the crisis due to logistical and banking issues. There may be some problems for shipments that are already in the pipeline,” said Ajay Sahai, Director General, Federation of Indian Export Organisations (FIEO).

Two-way trade between India and the Gulf Cooperation Council (GCC) touched $96.77 billion in 2016-17. Exporters are facing massive challenges as their shipments are stuck with shipping lines being stalled.

Sahai said there would be a rise in transaction costs and shipping charges. As a result, exporters will now have to negotiate for better prices.

Another issue is that of banking channels, as a lot of the transactions take place through Dubai, which may also come under pressure to tighten its belt against Qatar.

While exporters are exploring alternative ways to address the challenges that have cropped up, engineering exports from India to the region are likely to get hit leading to increased pricing of the goods reaching there.

“Indian business and trade have a big stake in the region and it is important to keep a close eye on the fast changing situation there. Inputs from our engineering exporters indicate that shipping lines operating between India and Doha are keeping the containers on hold. A few such incidents have been reported from Jebel Ali (Dubai) and Krishnapatnam ports,” said TS Bhasin, Chairman, Engineering Export Promotion Council (EEPC).

India’s engineering exports to the Gulf countries [Middle East and West Asia (MEWA)] declined marginally from $8.4 billion in 2015-16 to $8.2 billion in 2016-17. Average monthly exports too fell from $700 billion in 2015-16 to $682 billion in 2016-17.

A similar trend was observed in the case of Qatar. India’s engineering exports to Qatar declined from $363 million in 2015-16 to $213 million in 2016-17. Average monthly engineering exports also declined from $30 million to $18 million in the last financial year.

India’s exports to the region mainly consists of iron and steel products, non-ferrous metals, industrial and electrical machinery.

Automobile exports to Qatar had sharply declined by 70 per cent from $73.59 million to $21.70 million in 2016-17 and it is projected to further decline in the wake of the crisis.

However, according to Sahai, in the long run, Indian exporters should grab this opportunity and try to take Saudi Arabia and its allies’s share in the Qatari market.

Excerpts from sources.

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