By Vipin Agnihotri
In my opinion, the appreciation of the rupee against the dollar has severely eroded the profit margins of Indian exporters, forcing them to contemplate drastic measures such as minimizing workforce. Most of the Indian exporters are losing orders because of the increase in the rupee value.
Not so long ago, Federation of Indian Export Organisations (FIEO) announced that traditional exports have been severely affected and that almost four million people have lost their jobs. Point to be noted here is that if the trend persists, there is a good chance that eight million more jobs will be lost in the days to come.
According to sources, textiles and leather industries, which source their raw materials more or less from the domestic market, have been severely hit. As a matter of fact, 600,000 people in the textiles industry alone will lose their jobs next year.
The IT industry is also facing the heat from rising rupee. In terms of statistic, from a mere 5 per cent share of India’s 1996-97 exports of $33 billion, it has increased its share to 25 per cent of the country’s $120 billion exports in 2006-07. This by the way represents a compounded annual growth of 35 per cent over a 10-year period, making it the fastest growing and the biggest export oriented sector in the country. But the weakening of the dollar has meant that the IT bigwigs have been forced to minimize their revenue guidance for the future.
To get rid of rising rupee effect, the textiles industry is now considering new strategies. For example, exporters such as Crystaline are actually exploring the possibility of importing cheaper raw materials from countries like China to shore up their margins, which at this moment of time is hovering around the 2-3 per cent mark. The leather industry is also working overtime to minimize costs by importing cheaper inputs.
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