In recent times, Indian exporters face a number of problems. The problems demotivate the business firms to enter into foreign markets. Some of the problems are as follows:
1. Recession in World Markets: The world markets faced recession in 2008 and in the first half of 2009. The recession was triggered due to sub-prime crisis of USA in Sept 2007. Due to recession, the demand for several Indian items such as gems and Jewellery, textiles and clothing, and other items were badly hit. During recession, exporters get low orders from overseas markets, and they have to quote lower prices. Therefore, exporters get low profits or suffer from losses.
2. Protectionist Measures by Developed Countries: The developing countries like India have to face the problem of protectionist measures by developed countries. For instance, in 2009, USA Govt. provided a bailout package to General Motors and other firms to overcome from financial crisis. The bailout package contained ‘Buy American Clause’ which means the firms getting financial assistance from the Govt. have to use domestic content rather than importing from other countries. Since USA is the major importer from India, some of the exporters such as auto parts suppliers have to face problems.
3. Reduction in Export Incentives: Over the years, the Govt. of India has reduced export incentives such as reduction in DBK rates, withdrawal of income tax benefits for majority of exporters, etc. The reduction in export incentives demotivates exporters to export in the overseas markets:
4. Competition from China:India is facing stiff competition from China in the world markets, especially in the OECD markets. As a result, India’s share of exports to OECD markets has declined from 53% of total exports in 2000-01 to about 38% in 2007/8. Some of the Indian exporters have lost their overseas contracts due to cheap Chinese goods arid supplies.
5. Problem of Product Standards: Developed countries insist on high product standards from developing countries like India. The products from developing countries like India are subject to product tests in the importing countries. At times, the importing countries do not allow imports of certain items like fruits, textiles, and other items on the grounds of excessive toxic content. Therefore, Indian exporters lose markets especially in developed countries.
6. Problem of Anti-dumping Duties: Developed countries impose anti-dumping duties on certain goods imported from developing countries like India, Brazil, China and so on. For instance, USA had imposed anti-dumping duties on Indian steel items in 2008. Quite often, the anti-dumping duties are not justified. Therefore, India has to approach the dispute settlement body of WTO to resolve the dispute regarding anti-dumping duties. Till the dispute is resolved, Indian exporters lose business opportunities.
7. Problem of Sea Pirates Attacks: A major risk faced by international trade is attack by pirates in the Gulf of Aden. More than half of India’s merchandise trade (exports and imports) passes through the piracy infested Gulf of Aden. New exporters and importers are facing problems because of increased pirate attacks as they find it difficult to get insurance cover.
8. Problem of Subsidies by Developed Countries: The developed countries like USA provide huge subsidies to their exporters. For instance, in case of agriculture exporters, USA, UK and others provide huge subsidies to their exporters. Therefore, the exporters of developing countries like India find it difficult to face competition in the world markets.
9. Documentation Formalities: There are a number of documents to be prepared in export trade. In India, there are as many as 25 documents (16 commercial documents and 9 regulatory documents) to be filled in. However, aligned documentation system (ADS) has simplified export documentation procedure.
10. Foreign Exchange Regulations: Export marketing is subject to foreign exchange regulations. For instance, in India, the exporters have to give a declaration in Form GR to the Reserve Bank of India (RBI) that they will realize the full value of exports within a period of 180 days.
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