Institute Lecture Series: Importance of Exports

nirma university

On 19th October, 2013, the Seventh Institute Lecture for the academic year 2013-14 was delivered by Mr N Shankar, CMD – Export Credit Guarantee Corporation of India. He addressed the students on the importance of exports for our country.

He started by introducing International Trade and sought to underline the rise in India’s share in world trade through the years after Independence. Linking the current world economy to the sub-prime crisis in US, he explained each event in detail and linked it to the corresponding events in the Indian economy. Since India imports a vast amount of resources chiefly petroleum products and gold, the only way out of the twin deficit scenario is through increase in the foreign exchange reserves. This can occur through FDI and FII inflows, remittances from abroad, export to other economies and decrease in imports. Out of these alternatives, exports are the most viable option as FIIs are speculative in nature, FDI inflows take time to fructify, remittances are too meagre when viewed as a whole and reducing the burden of imports seems unrealistic in the short term. This is where companies like Export Credit Guarantee Corporation of India step in. They insure exporters against the loss and the risk of trading with foreign players.

According to Mr Shankar, an exporter primarily faces six risks: Foreign exchange fluctuation, default by buyers, political instability in the country of import, issues related to money transfer, failure of contract and performance and risk of transfer of goods. With the exception of foreign exchange fluctuations, the remedy for the remaining risks is insurance. He also outlined the seven principles of credit insurance namely, the principle of Uberrimae fidei, Insurable interest, indemnity, risk sharing, causa proxima, loss minimization and subrogation of rights.

The session was very participative and Mr Shankar appreciated the involvement of the audience.

 (Content Courtesy: Jijo George)

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