The US Economy, which grew 1.3 percent between April and June as compared to two percent betwen January and March, is slipping and both companies and consumers are cutting spending there, Bloomberg reported. The 27-member Eurozone could be headed into a recession, Reuters reported this week.
“The European region is the top export destination for India’s sports goods, followed by the US. The economic slowdown in both regions has affected export orders, which have reduced by around 20 percent this year,” said B.K.Kohli, vice chairman, Sports Goods Export Promotion Council.
Around 80 industrial units, a majority of which are small to midsize units, manufacture sports goods such as cricket equipment; athletics equipment; and balls exclusively for the export markets. A majority are based in Jalandhar and Meerut, Kohli said.
“It gets very difficult to compete in tough times like these because costs, such as transaction costs are higher in India,” said Kohli. Sports goods exporters in India enjoy a two percent interest credit pegging borrowing costs at around 10 percent. Borrowing costs in China, a top exporter of sports equipment, hover around two percent. “Interest rates should be lowered to around five or six percent to help us remain competitive,” Kohli said.
India’s sports goods exporters face several challenges. Infrastructure bottlenecks, such as the congestion at India’s ports, adds to exporters’ costs. “Infrastructure issues cannot be solved overnight. The government could help us by abolishing the 12 percent service tax,” paid on shipping invoices, Kohli said.
Government assistance for technology upgradation could go a long way in helping small to midsize sports goods exporters, Kohli said. “The government should invest in an R&D centre and a tools centre. Smaller units cannot invest in either R&D or in newer, more advanced tools,” he said.