Covid-19 accentuates supply side challenges with abnormal hike in freight rate: FIEO

Explaining the importance of exports in GDP growth, Sharad Kumar Sharaf, President, FIEO, says, “No country has ever achieved a GDP growth of 8% or more on sustained basis without double digit growth in exports. All those years in which India exhibited 8% plus GDP growth were the year when exports also clocked 15% or more. Therefore, vibrant exports are extremely important for us as we move towards a US$ 5 trillion economy with exports contributing to US$ 1 trillion.” While demand side should be taken care by the exporters, government plays an important role in imparting competitiveness to exports particularly addressing the supply side issues. Covid-19 has accentuated the supply side challenges with abnormal hike in freight rate, containers unavailability and frequent shutouts by the shipping companies. Government did encourage the shipping companies to bring empty containers and provided free movement of such containers from gateway port to ICDs/CFSs, the problem still continues. As global economy moves towards normalcy, we expect the situation to ease out. However, as a medium-term strategy, we should start manufacturing containers so as to manage the short supply particularly the mismatch between imports and exports as we move towards our goal of self-sufficiency.

Global trade has recovered remarkably well. The decline in Q3 and Q4 compressed to 4.5% and 3% respectively as against a whopping downfall of 19.5% in Q2 of 2020. The overall contraction in global trade is expected between 7- 8% which is much better than the best forecast given by WTO at minus 13% for 2020.