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Stronger Rupee erodes profitability of exporters

May '07
Garments Exporters Association has expressed serious concern over the persistent and significant appreciation of the Rupee against the dollar by about 10% adversely affecting the growth rate and profit margin of garment exporters.

It seems the gloomy picture would continue for some more time if the Government does not take immediate corrective measures to manage the currency exchange rate fluctuations by adopting effective exchange rate management policy.

The Association has pointed out that neither the Annual Supplement to the Foreign Trade Policy 2007 nor the RBI Credit Policy for 2007-08 have provided any specific proposal or export promotion strategy to reverse the recent downturn in garment exports.

The Government has not given due consideration to various representations submitted by the garment exporters for grant of adequate commercial and fiscal relief to meet the new challenges of increasing international competition with the recent sharp appreciation in the value of the rupee.

The GEA has urged the Finance Ministry to take immediate steps in line with the recommendation of the Ministry of Commerce to exempt exports from Service Tax and grant adequate and necessary fiscal relief to compensate exporters for the financial hardships suffered on account of upward movement of Rupee against the dollar.

GEA has pointed out in this context that the withdrawal of various tax exemptions by the Ministry of Finance has adversely affected the export performance and consequently reduced the profit margin and competitiveness of Indian garment exporters in the international market. The hardening of rupee during the last nine months has added fuel to the fire, further aggravating the present crisis being faced by the garment exporters.

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