Rising rupee hits 11 sectors reducing exports by 50%

A study conducted by the Federation of Indian Chambers of Commerce and Industry, or FICCI, stated that eleven sectors, accounting for 50% of Indian exports, have been hit by rising rupee. But the Commerce Ministry says that export competitiveness alone cannot determine rupee value.

Commerce Minister Kamal Nath told engineering exporters last week that a rising rupee is a fact of life they will have to learn to live with. This comes after April exports rose 23% over last year, showing no evidence of damage. It may be early yet and the actual impact may be felt in later months.

 

A survey by industry chamber FICCI says that 11 sectors, that make for 50% of exports have been doubly hit - by rising interest rates and an appreciating rupee.

 

Jairam Ramesh, Minister of State for Commerce, said, "One way of dealing with a rising rupee is to reduce the transaction cost somewhere and one way of doing that is by increasing the drawback rates. That is for the Finance Ministry to do."

 

Textile exporters met the finance ministry seeking relief last week, and leather exporters will do so next week. Jairam Ramesh says low value garment exporters have been hit. He believes that footwear exporters have weathered the rupee appreciation, as they do not sell to the mass market. In any case, the Reserve Bank cannot address itself solely to the concerns of exporters.

 

Ramesh added, "In my view, export competitiveness is not the sole determinant of the value of the rupee."

 

Price stability and management of capital inflows are other factors that the Reserve Bank will have to consider while managing the rupee's value. Jairam Ramesh says non-price factors are increasingly determining India's export share. For the finance ministry, that is a welcome message from a ministry with which it does not vibe well.