Current appreciation to hit small exporters: FIEO

20 Oct '09

2 min read

Mr A Sakthivel, President, Federation of Indian Export Organisations (FIEO) while commenting on the volatility of the rupee stated that (a) the rupee was bolstered or fell with an increase/decrease in the Indian benchmark SENSEX and (b) dollar weakness/relative strength of Asian currencies and, as such, has kept the MSME export sector on tenterhooks as they are worried about net realizations falling into a negative zone as they work on leaner margins in the present times.

FIEO Chief elaborated that large current account surpluses and low inflation rates retained the supremacy of the dollar. But the present volatility of a domestic currency vs. dollar is difficult not only for India (since exports are on the downturn) but also for economies of both Japan and Europe which are also dependent on exports.

The American currency on the other hand would prefer to be “weak" given the current situation. [The American treasury sold $1.4 trillion in fiscal 2009 ended Sept 30th to finance its budget deficit]. There is, however a shift in dollar as a “reserve currency" globally and it is 37% of the new reserves down from an average of 63% since 1999.

Mr Shaktivel opined that while the large exporters manage to hedge (which also comes at a cost) smaller exporters have to make do with a mark-up on their export pricing. The only possibility could be cheaper dollar loans as against LIBOR +3.5% (or more practically) in the given circumstances.

Federation of Indian Export Organisations

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