Exporters taken by surprise with solid appreciation in rupee
22 May '07
3 min read
• A significantly large proportion of the participating companies have said that in several countries and in several product categories they face stiff competition from Chinese exporters.
Given the 'implicit subsidy', which exporters from China enjoy in terms of an artificially pegged exchange rate, the recent sizable appreciation in the Rupee value has dealt a strong blow to the competitiveness of the Indian exporters.
• The results of FICCI's present survey show that while the adverse movement in the country's exchange rate is affecting a significantly high 75% of the participating companies, just about 30% of the participating companies have put in place or have resorted to a mechanism that provides cover for currency exposure.
• Further, 82% of the companies reported that in their agreements with their clients they do not have a clause that allows revision of rates in case of a sizable adverse movement in the exchange rate.
• The exporters are not viewing the recent strengthening of the Rupee on account of RBI's hands off approach and non-intervention in the forex market as a short-term phase.
Rather there is an apprehension that the Rupee will continue to maintain its current level over the next few months. Further, the participants have expressed concern over maintaining the growth momentum of exports.
• Several participants have reported that while any increase in the final price of their products would reduce their competitiveness in the international market, the present situation is such that they can no longer hold back prices. Click here to view more:
Federation of Indian Chambers of Commerce and Industry