Rupee hits exporters hard in its rise

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: So there is a huge debate going on in the SME sector over what should be government’s response to the rising rupee. Many of the SME sector players in the business of export of products and services are in a bind. The severity of the rupee appreciation has hit them hard. Almost all the export promotion councils have written to the government saying that they will not be able to meet the export targets in their respective domain. Some of the councils have strongly recommended government intervention in shielding them from the rupee appreciation.

With the rupee-dollar exchange rate hovering around Rs40 from a low of Rs 46 the exporters have had a 8 per cent hit in realisation. The profits are bound to erode in the coming months if the trend continues. The exporters are also operating at cost price or at marginal loss as there is no way to stave off the rising rupee.

The buyers abroad are ostensibly not ready to share the burden as many exporters from other countries have even changed the foreign currency in which they deal with making Indian exports uncompetitive.

There are several other exporters, especially in the garment trade who suggest that the current quarter could see a 5-8 per cent slump in garment export revenues. Last year India’s garment exports were estimated to be $9.5 billion. The rising rupee have also made the prospective buyers wary at the other end. There has been a drop in enquiries and an gradual slowdown in orders. This could lead to a 20 per cent drop in volume of exports in June-July, according to experts. Most exporters also feel that the rupee will strengthen further for another two months before settling down at Rs40 against the US dollar.

Many of the exporting firms especially in the clusters have chosen a joint decision to bring some method in the madness by taking a forward cover for part of its exposure. ‘‘It is possible that the hedging can yield at the Rs 43/44 levels,” one exporter explained.