Re appreciation: Exporters seek fixed exchange rate .

New Delhi, March 30 Troubled by the appreciation of the rupee, which strengthened to an 18-month peak of below Rs 45 to a dollar, the Federation of Indian Export Organisations (FIEO) has asked the Finance Ministry to provide exporters with a fixed exchange rate to enhance the competitiveness of Indian exports.

FIEO is the apex body for exporters.

In the letter, the FIEO President, Mr A. Sakthivel, said competing countries such as China and Bangladesh follow a similar policy, adding that, “The (Indian) Government can also contemplate to provide a fixed rate of exchange for exports on an optional basis.”

“An exporter opting for a fixed rate for a year may be credited at Rs 47.50 to a US dollar irrespective of the market value of US dollar. The scheme may be operational for one year from April 1, 2010 to March 31, 2011 and exporters opting for this scheme should give an irrevocable option to remain under it for a period of one year,” Mr Sakthivel said.

Indian exports have been hurt by the appreciation of the rupee by about 8 per cent in the last one year, he said.

Noting that a major reason for rupee appreciation was FIIs pumping in more money, the FIEO President said, “FIIs are making short-term profits and pulling out the money leading to sharp exchange rate movements. To avoid such fluctuations, there is a need to regulate the FII investment so that FII money stays in India for a minimum period of two years.”

The Export Promotion Council for Handicrafts Chairman, Mr R.K. Malhotra, said though the Government had given some incentives to the employment-intensive handicrafts sector, the currency appreciation has wiped out the benefits.

Source : Business Line