currency fundamentals-Strong rupee to hit exports

deccan chronicle-Exporters are concerned that rising Rupee will hit their competitiveness as steady inflow of FIIs money is expected to put upward pressure on the currency in coming days.

“Many of my exporter friends have highlighted their concern due to appreciating Rupee. While Rupee has gained a bit in last 2-3 days, we feel that Rupee will appreciate in near future,” FIEO, president G.K. Gupta said last week.

The impact of Rupee appreciation varies from sector to sector. Some of the sectors with high import intensity like gems and jewellery, petroleum products, certain electronic goods do not suffer much on account of such appreciation.

However,  traditional sectors of exports like handicrafts, carpets, handlooms, textiles, leather, agro-products, marine goods among others face huge competitiveness issue on account of such appreciation.

Mr Gupta said that currencies of many competing countries is expected to depreciate further. “We have already seen how the appreciation of Chinese Yuan by over 10 per cent in last 18 months have impacted India’s exports as Rupee has depreciated marginally during the same period. The down grading of sovereign ranking of China by the international rating agency is bound to have impact on flow of investment to China. There is continuous flight of capital from many emerging economies to US. However, FII and FDI inflows in the country are on the up,” said Mr Gupta.

He said that all factors indicate that Rupee may strengthen further in near to medium term basis. “We acknowledge the positive role played by Rupee appreciation in Indian economy particularly, as it helps in containing import led inflation. However, it does affect competitiveness of Indian exports,” he said.

FIEO requested the government to look into the matter and provide some support to export sector based on the net foreign exchange criteria so that those sectors having large imports are provided less support while sectors having little or no imports are given higher support.

Strong Concerns
Sectors with high import intensity like gems and jewellery, petroleum products, certain electronic goods do not suffer much on account of such appreciation.

Traditional sectors like handicrafts, carpets, handlooms, textiles, leather, agro-products, marine goods among others face huge competitiveness issue on account of such appreciation.

All factors indicate that Rupee may strengthen further in near to medium term basis.

We have already seen how the appreciation of Chinese Yuan by over 10 per cent in last 18 months have impacted India’s exports as Rupee has depreciated marginally during the same period.

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