An appreciating rupee is causing anxiety among exporters. Though November and December export numbers have shown a positive growth after a 13-month decline, the problems for exporters may be far from over. In December exports grew 16 per cent year on year to $ 14.6 billion. The rupee on Monday rallied by 42 paise to close at a 16-month high of 45.33 against the US dollar on heavy selling of the American currency by exporters. Since April 2009 rupee has risen nearly 10 per cent against the US dollar and experts say that the trend would continue.
Anubhuti Sahay, economist with Standard Chartered Bank, predicts that the rupee could surge to Rs 42 against the dollar in 12 months.
A stronger rupee hurts exporters because every dollar in export earnings fetches less rupee. “If rupee goes below Rs 45 then it will be a big blow to exporters,” director general of Federation of Indian Export Organisations (Fieo), Ajay Sahai, said, adding that the government would have to play a balancing act by keeping the rupee under control and at the same time not scaring away foreign institutional investors by applying stringent regulations. Since July 2009, FII inflow in equities has been roughly $12.4 billion.
Former director general of foreign trade and director of Indian Institute of Foreign Trade K T Chacko said since India had shown a fast recovery compared to other countries, rupee appreciation was expected.
A commerce ministry official, who did not wish to be named, said that if the rupee continued to appreciate, then Indian exporters could find it very hard especially when pitted against their Chinese counterparts.
“If rupee appreciates further, Chinese exporters will gain,” he said. “Unlike petroleum and electronic products, which are import-heavy, textiles and handicrafts are not. They are in a vulnerable state,” Sahai added. Chairman of Synthetic and Rayon Textile Export Promotion Council, G K Gupta, said that the experiences of 2007 when rupee hit an all time high of Rs 40 against the dollar should encourage the government to take pre-emptive steps. “In 2007, several workers lost jobs and many factories shut down. We will take stock of the situation in the next 3-4 days before taking any action,” he said.
Urging the government to make life easier for exporters, executive director of Gem and Jewellery Export Promotion Council Sab-yasachi Ray said, “We have petitioned the finance ministry that all loans sanctioned to exporters be made in dollars and international rates of interest charged.”
Source : mydigitalfc.com