Export Federation Urges Prudence Amid Temporary Strait of Hormuz Reopening
Ludhiana: The President of the Federation of Indian Export Organisations (FIEO), SC Ralhan, has stated that while the announcement of a ceasefire and the reopening of the Strait of Hormuz have provided immediate relief to exporters by easing shipping disruptions, this may only help normalize logistics in the short term. Exporters are advised to remain cautious given the temporary nature of the truce.
Wait-and-Watch Approach Recommended for Volatile Situation
Ralhan emphasized that sustained stability is essential for restoring confidence and ensuring smooth trade flows. He recommended that exporters adopt a wait-and-watch approach amid reports of ceasefire violations following the announcement. Resuming exports through the Strait of Hormuz should only be considered once conditions are fully assured, he cautioned.
The FIEO President noted that exporters have already faced significant challenges since the conflict began, with many consignments getting stranded. He specifically advised exporters to West Asia to avoid sending shipments for now due to a trust deficit arising from the volatile situation and the high risk of cargo getting stuck again. "Exporters should not take a chance until a complete assurance is there," he stated firmly.
Projected Impact on Indian Exports and Competitiveness Concerns
Discussing the impact of the conflict on Indian exports, Ralhan added that the West Asia crisis could lead to a dip of approximately 7–8 percent in exports for March alone. On an annual basis, goods exports may be hit by 2–3 percent. However, he projected that combined goods and services exports are still expected to grow by about 5–6 percent.
Speaking about improving export sector competitiveness, Ralhan highlighted that interest rates on loans for exporters are currently high, particularly for the manufacturing sector. To support exporters, he suggested that lending rates for export-oriented businesses should not exceed 2 percent at the government level.
He pointed out that several competing economies offer significantly cheaper credit, citing Japan as an example where exporters can access near-zero interest financing, which enhances their competitiveness in global markets.
Call for Government Support on Modernization and Tax Reforms
Ralhan also stressed the need for greater government support for the modernization of equipment through more viable technology upgradation schemes. With global demand shifting toward high-precision and advanced products, he said exporters must invest in modern machinery, while the government should facilitate this transition through policy support and incentives.
He added that business owners should proactively invest in upgrading factories to remain competitive in the international arena.
Furthermore, Ralhan called for ending the inverted duty structure, arguing that it encourages tax evasion and creates complexity in the tax system. Although the Goods and Services Tax (GST) has simplified the taxation system compared to the Value Added Tax (VAT), he advocated for a one-slab uniform GST, possibly at a rate of 12 percent.
Such a structure would improve clarity, encourage more businesses to come under the GST ambit, and ultimately benefit government revenues, he concluded, underscoring the importance of comprehensive policy measures to bolster India's export sector amidst ongoing challenges.
