Rising rupee, tough competition hit Indian exporters
Friday, 06 February 2004, 20:30 IST
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NEW DELHI: The continuing appreciation of the rupee against the US dollar is worrying Indian exporters as it is eating into their profits, says a survey by a leading industry lobby. This apart, competition from China, Pakistan and South Korea is eroding their share of the pie. "Industries located in north India and particularly exporters have expressed serious concern over the upward movement of the rupee against the dollar for the last two years," said a PHD Chamber of Commerce and Industry (PHDCCI) survey issued Thursday. According to the survey -- carried out by PHDCCI in Punjab, Haryana, Chandigarh, Delhi, Uttar Pradesh, Rajasthan, Himachal Pradesh and Jammu and Kashmir -- "exporters are particularly perturbed by the fall in profits arising out of the recent surge of the rupee". Trade experts fear the rising rupee will prevent India achieving its 12 percent export growth target for fiscal 2003-04 ending March 31. India is targeting a one percent share in global trade by 2007 with around 12 percent year-on-year growth. Last year it achieved over 19 percent growth to cross the $52 billion mark. Exporters are worried the rising rupee will adversely impact prospects in the US market by making their goods more expensive against those of neighbouring countries whose currencies have not appreciated much. The survey showed international buyers were unwilling to pay the extra costs accruing from currency appreciation. This lowered the exporters' profit margin. "Firms find that their exports are being especially hurt as countries like China and South Korea are quoting very low prices for their products, which is leading to buyers switching over to these countries and resulting in loss of orders for Indian companies," the survey said. The strengthening of the rupee is particularly affecting price sensitive items like textiles, since countries like Pakistan and China have not witnessed a similar currency appreciation, the report said. "In fact, textile exporters are experiencing a squeeze in profit margins as Pakistan, which has recently depreciated its currency, and China, which has held its currency at an artificially low rate, are now able to charge lower prices for their exports," PHDCCI said. Capital goods exporters too have to bear the double whammy of cost escalation due to the rising rupee and the recent build-up in domestic prices of inputs like steel, copper, aluminium and zinc. The net impact has been to put capital goods exporters in a very tight position in international bids at a time when countries like China and South Korea are quoting much lower rates. "Against this backdrop, exporters maintain there is an impelling need for the government to come up with innovative measures to ensure the rupee is not overvalued from the vantage point of India's competitiveness," the report said. Around 77 percent of respondents to the survey feared fresh appreciation of the rupee would hurt export prospects of domestic industries in the future. Only 23 percent maintained their exports would remain unaffected by this. All respondents surveyed invoice their exports in dollars. While 40 percent deal only in dollars, 30 percent make their settlements both in the dollar and euro. Nineteen percent have spread out their receivables over the dollar, the euro and the pound while just three percent receive payments in dollars or pounds. Despite the depreciation of the dollar and the strengthening of the euro, only 30 percent of exporters contemplate switching to invoicing in the euro due to recent developments in exchange rates between the rupee and the dollar.
Source: IANS
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