Interviews
Stronger rupee Vs weaker exports
21 Jun '07
9 min read
A nation's economy thrives only when its exports breathe free and register tangible and string less growth. The hardening of the rupee has brought hard times to the exporters in India. That export becomes less competitive and import lucrative is an open criterion whenever currencies tend to become strong.
Garment exporters are no exception to this general rule of the international trade. If not dealt with promptly and effectively, the steep and sudden rise in value of rupee is all set to hurt exports performance. To combat the fluctuations in the value of the rupee, a careful assessment and close monitoring of the exchange rate should be undertaken to ensure that financial flows do not adversely affect the exporters.
What makes the situation more difficult for the exporting community is the rising inflation rates resulting in the increased cost of raw materials rendering our goods expensive and non-competitive in the global market.
According to the recent statement of Dr.V.V.Reddy, Governor, RBI, the Indian foreign exchange market has been widened and deepened with the transition to a market-determined exchange rate system. Our exchange rate policy in recent years has been guided by the broad principles of careful monitoring and management of exchange rates with flexibility, without a fixed target or a pre-announced target or a band, coupled with the ability to intervene if and when necessary, while allowing the underlying demand and supply conditions to determine the exchange rate movements over a period in an orderly way.
Garment exporters are no exception to this general rule of the international trade. If not dealt with promptly and effectively, the steep and sudden rise in value of rupee is all set to hurt exports performance. To combat the fluctuations in the value of the rupee, a careful assessment and close monitoring of the exchange rate should be undertaken to ensure that financial flows do not adversely affect the exporters.
What makes the situation more difficult for the exporting community is the rising inflation rates resulting in the increased cost of raw materials rendering our goods expensive and non-competitive in the global market.
According to the recent statement of Dr.V.V.Reddy, Governor, RBI, the Indian foreign exchange market has been widened and deepened with the transition to a market-determined exchange rate system. Our exchange rate policy in recent years has been guided by the broad principles of careful monitoring and management of exchange rates with flexibility, without a fixed target or a pre-announced target or a band, coupled with the ability to intervene if and when necessary, while allowing the underlying demand and supply conditions to determine the exchange rate movements over a period in an orderly way.
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