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Exporters taken by surprise with solid appreciation in rupee

22
May '07
While the Indian exporting community has welcomed the measures outlined in the trade policy announcement for 2007-08, its enthusiasm with regard to export performance in the near term has been severely dampened by the sudden and sharp appreciation of the Rupee seen during the last few months.

• The results of the present survey show that the incremental improvement in the outlook for exports seen in the last survey has failed to sustain itself despite the positive announcements made in the trade policy supplement for 2007-08.

• The strong and sudden appreciation in the exchange rate seen over the last few months has taken the Indian exporter community by surprise that was already reeling under the pressure of rising raw material costs and hardening interest rates.

• Participants in FICCI's current round of export survey have reported that exports in segments such as textiles, gems and jewellery, tea, spices, leather and marine products that contribute strongly to India's overall exports are extremely price sensitive and the recent movement in the Rupee's value has started impinging on their export performance.

• While on one hand the Rupee realization for the exporters is going down, on the other hand their margins are getting squeezed to the point where some of them are contemplating catering only to the domestic market for the time being.

• The most severely hit are the small and medium enterprises, which unlike large enterprises neither have the option of reducing their cost burden by resorting to external sources of finance like ECBs nor have the knowledge about how to safeguard and hedge their currency exposure using sophisticated techniques like the forward contracts.


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