SME export rebound runs into Europe

The story of a gradual rebound in exports by small and medium enterprises (SMEs) has taken a negative twist because of the ongoing European turmoil.

India’s exports rose 35% in May to $16.1 billion over a year earlier.

The growth, though an indication of recovery, was largely attributed to the low base last year, when exports fell 4.7%. This year, India is targeting a growth of 15%.

SMEs — there are 14 lakh of them in India — contribute 45% to exports and 70% to GDP — have heaved a sigh of relief in recent months because of a turnaround in enquiries and orders from the US, their biggest market.

But just as that happened came the jolt from the cascading public debt crisis in Europe involving Portugal, Italy, Ireland, Greece and Spain or the PIIGS.

The depreciation of the euro has only added to exporter worries, with the rupee gaining nearly 20% since the 52-week low of Rs 71/euro on October 22.

India’s commerce secretary Rahul Khullar on Wednesday said the crisis is indeed a concern for exporters this year.

He said India can no longer expect a growth of 25-30% in exports.

Purushottam Agwan, honorary general secretary, Chamber of Small Industry Associations (COSIA), said the prospects for SMEs in Europe is turning from bad to worse.

 “We are getting enquiries from the US and Middle East, but not from Europe. No one is expecting a miracle there,” he said. His company, R K Dutt Concerns, exports instruments to oil & gas refineries. About 10% of its revenues comes from exports.

Dharmu Vanjani, managing director, S S Natu Plastics & Metals, does not buy that there is strong recovery underway in the US.

“According to my personal experience, things have not changed much either in the US or Europe,” he said.

Unlike his peers in the industry, Vanjani is hopeful of his company’s prospects. “We manufacture electric bicycles and generators. Since there is a lot of demand for green products, we expect enquiries,” he added.

Among the various sectors, textiles, gems & jewellery, leather and handicraft are heavily export-dependent.

Yogesh Dixit, head, SME ratings, Crisil, feels the only way SMEs can beat the volatility of the global economy is by having operations in different markets. “The overall recovery is driven basically by domestic demand but there is an overall improvement in exports,” he added.

An entrepreneur, who exports equipment to chemical companies in Europe and Australia, said companies like his will have to turn their focus to the Indian market instead of waiting for Europe to stabilise. “The way things are, I don’t see things looking up in Europe for the rest of the fiscal,” he said, requesting anonymity.