1. Indian rupee fall effect: Some exporters stand to gain, hedging costs to rise for most

Indian rupee fall effect: Some exporters stand to gain, hedging costs to rise for most

Labour-intensive sectors such as gems and jewellery will not benefit from the depreciation of the rupee.

By: | New Delhi | Published: August 25, 2015 6:43 AM
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Labour-intensive sectors such as gems and jewellery will not benefit from the depreciation of the rupee. (PTI)

With Indian rupee registering its biggest single-day fall this year, tumbling by 82 paise at 66.65 against the US dollar, experts said that exporters of labour-intensive sectors such as handicrafts and carpets stand to gain even as they maintained that the development will not help in making up for the decline in exports so far. Also, the cost of hedging cost will get pushed up further, experts added.

“I don’t think this will help because the phenomenon is not exclusive to rupee. Currencies in other countries have also depreciated. However, it provides level-playing field to Indian exporters. The volatility does not help exporters rather it increases the hedging cost. Labour-intensive sectors such as handicrafts and marine products will however benefit from it,” Ajay Sahai, director general, Fieo, said.

The labour-intensive sectors such as gems and jewellery, high-end engineering, and electronic items, which get inputs from import will however not get the benefit of the rupee depreciation, Sahai said, as the import cost will go up.

Earlier during the day, RBI governor Raghuram Rajan had assured that the country has enough resources to deal with undue volatility. “If the rupee strengthens too much then it creates problems for exports and there is certainly a vocal room which has, in the last few weeks, been taking about the rupee being too strong. And, you are absolutely right in saying if it weakens too much, it creates other problems such as imported inflation and so on… I want to repeat that again that if we see undue volatility, we have the resources to deal with that”.

Reacting to the depreciation, Fieo president S C Ralhan said such volatility will not add competitiveness to exports as these exchange rate, being volatile, can’t be factored into prices. “Only miniscule exporters who have not hedged their risk and received their payment may get windfall gain,” he said.

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