Goods exports may rebound over 14% in FY25, need more bank credit: FIEO

India's exports set to reach $500 billion with improving global demand, but Red Sea crisis threatens competitiveness.

India’s goods exports could rebound to hit $500 billion this year as global demand is slowly improving and prospects of a good monsoon could free up curbs on shipments of agricultural products, the country’s apex exporters’ group said on Thursday. Exports had slipped to $437.1 billion in 2023-24 after hitting a record high of $451.1 billion in the previous year.

However, the persistent Red Sea crisis that has raised the cost and time for shipping goods to major markets, is beginning to hurt with a few orders already being lost in sectors like metals and commodities. Delays and higher costs of shipping can lead to more order cancellations and hurt India’s competitive edge in global markets, the Federation of Indian Exporters’ Organisations (FIEO) flagged.

Using longer sea routes was disrupting delivery schedules and triggering spoilage of perishable goods, and exporters opting to send goods as air cargo, which had a limited capacity, had pushed up costs by as much as fourfold on some routes like India to Europe. “The Red Sea crisis is having a significant negative impact on both sea freight and air freight, which is in turn affecting Indian exports,” FIEO president Ashwani Kumar said.

Flagging some structural issues affecting exporters, the FIEO chief noted that while exports contribute more than 20% of GDP, their share in the net bank credit was not commensurate. “The demand for the credit has gone up with rising inflation, high commodity prices and abnormal increase in sea as well as air freight,” he said, adding that slow offtake and longer transit times were also delaying export payments, so more credit was needed for longer durations.

Noting that there had been a consistent decline in credit to exporters in recent times, FIEO mooted that the RBI consider prescribing a sub-target for export credit within the existing 40% target for banks’ priority sector lending.