Sentiments dampen as US government shutdown continues

Market News

Sentiments dampen as US government shutdown continues

The US government shutdown has entered its third week andan array of government services are on hold due to the shutdown. Three months from August to October are critical when most of the holiday season’s merchandise is brought into the US. About 4.42 million cargo containers are expected to move through the ports during those three months, a 5.9% increase over last year. They represent 25.6% of all retail imports through the entire year.

Those most affected will be importers and exporters whose shipments require paperwork from federal agencies like the Environmental Protection Agency, the Food and Drug Administration, the Department of Agriculture and the Fish and Wildlife Service, said Susan Kohn Ross, an attorney with Mitchell Silberberg & Knupp in Los Angeles. If the shutdown continues, cargo will back up, forcing shippers to accrue demurrage and storage costs, she said.

India’s main exports to US include diamonds, textiles, readymade garments, carpets, leather products, dyes, iron and steel products. There is nothing at all to worry now but if the shutdown continues then it may affect the shipments, said Ashok Rajani, Vice Chairman, AEPC and Director of Midas Touch Apparel.

Indian textile exporters are not happy as this may lead to slowdown in the exports to the country if the situation persists after October 17, the deadline given by Obama to the Congress to raise the debt ceiling from US$ 16.7 trillion. Mahesh Singhal, of Amko Exports, a leading exporter of handloom made-ups from Ghaziabad said that so far the shutdown has not created an impact on the exports. India’s exports grew for the third consecutive month by 11.15 percent to US$ 27.68 billion in September. The US is one of the major export destinations for the country which accounts for over 20% of the country’s exports.

However, Pradeep Nahata, exporter of Karni Exports comments, “The indefinite shutdown in the government services in the US is creating uncertainty, and exports could get affected if the stalemate continues. This is specially an unfortunate situation for the smaller exporters, who depend a lot on their buyers, and have very few options. Our buyers, who were planning for big quantity orders, now have cancelled them completely or they have cut down the quantity by 75%. It is not easy to bear the factory expenses and to survive with this kind of business, if the situation continues even after October 17.”

After a gap of 17 years, the US Government has been shut since October 1, raising concerns over its impact on the world's largest economy and also the emerging markets like India. Obama and Congressional Democrats are insisting that the ceiling be lifted, at least for the short term and the budget be passed to end the shutdown.