US credit rating may falter Indian exports

India’s exports may get affected in the wake of a slowdown in major economies across the world led by the US, which saw its economy being downgraded by credit rating agencies, a leading industry forum said on Sunday.A survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) in the aftermath of the US economic downgrade revealed that there would be a slip in the consumption demand overseas.“A majority of the respondents feel that the current trend of high export growth will not be sustained in the months ahead. There is significant apprehension about the global economic recovery, which in turn is expected to impinge on consumption demand,” said a statement from FICCI.“The sovereign debt crisis in Euro zone, weakness in the US and moderation of economic activity in China may significantly affect the level of external demand. This could be detrimental to the recently gained momentum in India’s exports performance as these economies are India’s major trading partners,” it added.India has been reporting robust export growth in the current financial year. June figures showed a 46 per cent rise in exports at $29 billion. For the quarter ended June 20, exports have risen 45.7 per cent to $79 billion.Therefore, the recent slowdown in key economies which are important export destinations for India, is not good news. Add to that the rising cost of credit because of incessant rate hikes by the Reserve Bank of India.“The outlook for exports is also tempered on account of factors such as rising interest rates in India, rising raw material prices and rising cost of oil. The closure of the DEPB scheme by end September 2011 has also been cited as one of the factors that would undermine export growth going ahead,” said FICCI. DEPB is an incentive scheme for exporters. The FICCI survey also projected that the US economy would grow by about 2.5 per cent in 2011, which is lower than the IMF prediction of 2.8 per cent as demand would remain weak from both consumers and businesses and because of a moderation in government spending. The survey respondents also felt that the Euro area could grow by about 1.9 per cent in 2011, but there would be disparities in the growth rates of individual economies in the Euro zone. Western Europe is estimated to grow at a modest 1.5 per cent in 2011, but with significant variability.Germany, the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) along with Benelux countries (Belgium, the Netherlands, and Luxembourg) are expected to perform at the higher end -above 2 per cent -while the UK and France are likely to see growth in the range of 1.5-2 per cent due to budget cuts and less exports. From / Gulf Today