Ukraine war: Indian exporters in apparel and engineering sectors face decline in export orders from Europe

As a result of the ongoing crisis between Ukraine and Russia, Indian exporters in the apparel and engineering sectors have started to see a decline in the number of export orders from Europe.

With Europe being the largest national export market for India, reduction in the number of orders would have an impact on the overall demand in the next few months.

Apparel Export Promotion Council (AEPC) chairman Narendra Goenka told Business Standard that while apparels have limited exposure to Ukraine and Russia, orders from Europe were also getting affected.

He added that the corporates in Europe were not committing as they would have had there not been a war. There has been a slowdown in orders since last week.

“There has been a slowdown in payments from Russia. We have to see how the situation unfolds and settles. If the war prolongs, and it spreads to other European countries, then there will be a problem,” Goenka told Business Standard.

While the impact may not be visible yet, for any exporter, the last two months of the financial year are crucial as it is considered the peak season for exports.

A textile exporter said European exporters are postponing fresh orders for summer. This becomes an issue for Indian exporters as they mostly make summer clothes unlike China, which produces both summer and winter clothes.

Impact on Europe can adversely affect an industry that is just recovering from the pandemic-induced slowdown. Europe and 11 other countries including United Kingdom, Turkey and Switzerland form the largest marker for India with a share of a fifth of total exports from India.

India exported goods worth $60.33 billion to Europe during the first three quarters of the current fiscal. Of this, over 40% of the product value can be attributed to engineering goods. The share of textile exports to Europe is 12%.

Even the tea industry is on tenterhooks as Russia is among the top two buyers of Indian tea — the other being Iran. Russia accounts for about 18% of the industry’s total exports and the entire Commonwealth of Independent States (CIS) at close to a quarter.

India's share of exports to Russia as a proportion of its total exports is 0.8%, while India's imports from Russia constitute 1.5% of its total imports, according to data by the Ministry of Commerce and Industry.

The Export Credit Guarantee Corporation of India’s review of Russia's risk rating will directly affect the exports to Russia, said Arun Garodia, vice chairman at the Engineering Export Promotion Council.

Sanctions by the world community might also play a spoilsport for exports from India, since banks may not accept export documents and payments cannot be transferred, he said.

India's trade linkages with Russia and Ukraine are not as large as with other nations. Russia is ranked 32nd for exports from India and 20th for imports. Ukraine ranks lower still.