Bad times for Indian exporters

By Vipin Agnihotri

I am quite sad to say it but it’s true that these are bad times if you happen to be an Indian exporter. It is worth mentioning in this regard that the appreciation of the rupee against the US dollar has had a debilitating impact on their businesses.

As a matter of fact, plenty are being forced to consider drastic measures, such as minimizing their employee strength in order to stay competitive. I am dead sure that the export target of $ 160 billion for the present financial year will not be met. Indian exporters will be happy if this figure even touches $ 140 billion.

The Indian government should have taken proactive steps early on in the piece but as always they acted late. According to sources, Commerce Ministry has now shaken off its complacency and has announced few measures. It includes, a refund of service taxes on some services and payment of interest on exchange earners foreign currency accounts.

Clearly, this is not going to be enough and exporters will have to take steps on their own to ride out the storm. Plenty of exporters are working overtime to move up the value chain to products that fetch better margins. On the other hand, there are few exporters who are importing cheaper raw materials from low-cost destinations such as Thailand, China and Bangladesh.

This will provide exporter a natural hedge against a rising rupee since the invoicing is done in dollars. But the results from these steps will start to show only after few months. There are lots of global factors responsible for this situation, but no one will argue with the fact that Indian government and Reserve Bank of India has played some part in it.

Reserve bank policy of containing the rising inflation rate to the exclusion of all other factors has been a major contributor to the rupee’s rise.

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