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Textile exporters should tread cautious path: ECGC official

Staff Reporter
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think tank: Karur Vysya Bank Managing Director P.T. Kuppuswamy (left), ECGC Karur Branch Manager V. Shankar (middle) and ECGC General Manager V. Viswanathan, at a seminar in Karur.
think tank: Karur Vysya Bank Managing Director P.T. Kuppuswamy (left), ECGC Karur Branch Manager V. Shankar (middle) and ECGC General Manager V. Viswanathan, at a seminar in Karur.

With the global economic meltdown affecting every sector of international trade, textile exporters should tread a cautious path avoiding the pitfalls of an integrated market that has taken a toll even on reputed banking and commercial establishments in the past three years, according to V.Viswanathan, General Manager, Export Credit Guarantee Corporation (ECGC), Mumbai.

Delivering the keynote address at a seminar organised by the ECGC here on Friday, Mr.Viswanathan said foreign trade accounted for 45 per cent of India's business transactions with 17 per cent imports and 28 per cent exports.

The post September 2008 global crisis has adversely affected India's international trade and exports have shrunk . Since October 2009, the situation has improved and in 2009-10 the exports were worth $ 176 billion-five per cent less than that of the previous year.

During current fiscal, till August, exports have recorded a healthy 29 per cent growth over the corresponding figures for the previous year. The growth can be attributed to some economic recovery in the target markets. In monetary terms the export value stood at $ 85.27 billion, Mr.Viswanathan said.

However the United Kingdom, the United States and the Europe markets continue to pose a challenge to Indian exports as their economies were yet to show significant revival. The United Arab Emirates, Greece, Spain, Turkey and Italy have run up huge trade deficits and trading with them is a concern.

Defaults and insolvencies not just in the United States but also across the United Kingdom, Europe and the West Asia have posed additional challenge and exporters need to keep a watch on them as many reputed international banks and industrial houses have been forced out of businesses due to mounting losses, he added. Many of our exporters think that business failures were not possible since they had been dealing with the reputed buyers for long. But the fact that average corporate life expectancy in Europe and Japan pegged at just 12.5 years was a point to ponder.

It is under these circumstances, that the ECGC has been extending an helping hand to exporters and banks by ensuring that the export receivables of every Indian exporter is protected from credit risks by providing useful credit insurance schemes.

During 2009-10, the ECGC earned a premium income of Rs. 813 crore and paid out claims totalling Rs. 641 crore, besides apportioning Rs. 1,600 crore for pending claims, Mr. Viswanathan said. So far claims amounting to Rs. 270 crore have been settled to exporters as against the premium income of Rs. 288 crore. For banks, the claim amount paid totalled Rs. 371 crore against the premium of Rs.487 crore.

Claims were paid on account of buyer risk across 82 countries and claims were honoured under every commodity grouping with gems and jewellery, readymade garments, engineering, chemicals and textiles accounting for the bulk, Mr.Viswanathan said.

The Managing Director of Karur Vysya Bank P.T.Kuppuswamy; Assistant General Manager of Canara Bank, Karur, Mr.Velusamy; Regional Manager, ECGC, Chennai, N.Radhakrishnan; Chairman of Karur Textile Forum M.Sivakkannan, and the Branch Manager, ECGC, Karur, V.Shankar participated.

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