Iraq war expected to hit Indian exports

Friday, 21 March 2003, 08:00 Hrs
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NEW DELHI: The outbreak of war in Iraq is expected to hit Indian exports -- which have been rising for a year -- as consumer sentiments in the West are low.

The heightened tension in the Middle East region is also likely to see a rise in freight charges, which have been witnessing an upward movement for some time, say exporters.

It is not only overseas buyers who are fighting shy but also Indian exporters, who have started cancelling promotion trips.

"The fear and uncertainty will keep away buyers from Western countries as consumer confidence becomes shaky. Though business will continue as usual, India may well see lack of new orders for some time," said Subhash Mittal, vice president of Federation of Indian Export Organisations (FIEO).

A delegation from Engineering Export Promotion Council (EEPC), which was slated to leave for Saudi Arabia Friday for a trade and investment promotion visit, has decided to postpone the trip.

"People have called up to cancel travel plans not only for the Saudi Arabia trip but also for participation in a trade exhibition in Ethiopia next month (April 14-17)," said C. S. Shukla, executive director of EEPC.

Middle East countries as well as Iraq are major markets for engineering goods and service exports from India, growing at an average rate of around 10 percent annually.

Of India's $6 billion exports of engineering in 2001-02, Middle East countries accounted for $950 million. Such goods worth $116.1 million were delivered to Iraq under the U.N. supervised programme for infrastructure development.

Reversing the negative trend of 2001-02, India has been witnessing double-digit growth during the 2002-03 fiscal and is expected to surpass the 12 percent growth target.

India had been eyeing an increase in the export of goods and services to Iraq under the latest round of projects awarded, industry officials said.

"Though it is early to say what the level of impact will be, there is definitely going to be lot of problem due to the war," said Shukla.

Export bodies said there are indications that airlines and shipping lines were increasing their rates while risk insurance costs too were moving upwards.

"Over the last several weeks there have been a steady increase in freight charges, which over the last few days has going up on a day-to-day basis with several foreign airlines not accepting much cargo due to space constraints. Several European airlines have reduced operations to the region, leading to capacity constraints," said Mittal.

T.K. Bhaumik, international trade consultant with the Confederation of Indian Industry (CII), shared the exporters' concerns about the impact of war, particularly in the Middle East.

"With the rise in oil prices and security risks, freight costs will go up along with war risk insurance. Some shipping lines may even halt operations along certain routes, considerably impacting exports to the Middle East," said Bhaumik.

The uncertainty of which way the war will swing and the likely impact on the movement of ships will see a slowdown in exports, said Navratan Samdria, member of the FIEO managing committee.

"With shipping companies afraid to operate in the war zone, there is definitely going to be a slowdown. If the war continues into April-May, then for those catering to overseas market for Christmas, the time to strike deals and make deliveries will be lost," said Samdria.
Source: IANS
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