Rupee volatility: Exporters find it tough to take pricing decision

Aug 30 2013, 08:28 IST
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SummaryIT sector is struggling to come to terms with the sharp volatility in the exchange rate.

IT sector. For the textile sector, the rupee’s sharp slide has proved to be counterproductive. As against the perceived benefits from a sliding rupee, the uncertainty in the market has, instead, offset much of the gains from the notional currency advantage in the short-run.

Especially since most exporters did take some sort of cover in the form of hedging at a pre-decided rupee-dollar exchange rate. Rahul Mehta, president, The Clothing Manufacturers’ Association, said “the uncertainty looming in different segments of the economy is making all sorts of predictions meaningless.”

According to garment exporters, there is also pressure from buyers in key markets to renegotiate contracts afresh in view of the notional gains for domestic exporters.

DENTING EARNINGS

* Exporters such as the IT-ITeS and the textile industries are unable to decide at what price to enter into a deal due to the constant volatility in exchange rates

* As a result, exporters in the IT-ITeS and textile sectors are unable to reap the advantage of a depreciating rupee

* For long-term contracts, any passing on benefits to the customer results in depressed export earnings as the currency value is itself hedged

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