India Business
Exporters look for alternatives as rupee appreciates: survey
May 20, 2007 - 11:29:31 AM

New Delhi, May 20 - With the rupee appreciating day by day and putting consequent pressure on companies' bottomlines, Indian exporters are gradually shifting their focus in doing business with euro-denominated trade opportunities, says an export survey.

The survey, conducted by the Federation of Indian Chambers of Commerce and Industry -, has also shown that the exporters have become extremely jittery over certain adverse affects of the rising rupee that has led to increase in the cost of raw materials and interest rate.

The sudden rise in rupee have made the export of items like textiles, gems and jewellery, tea, spices, leather and marine products that contribute significantly to India's overall exports, have become extremely price sensitive.

'Exporters are also on the lookout for clients and markets where euro could be replaced as a medium of exchange for the US dollar. Many exporters are also trying for a complete shift in the medium of exchange from dollar to euro in their existing contracts,' FICCI said in a statement.

The survey has been conducted over 304 companies having an annual turnover of Rs.10 million to Rs.150 billion representing sectors like automobiles, consumer durables, food and food processing, gems and jewellery, FMCG, textiles, handicrafts, metal and metal products, heavy engineering, pharmaceuticals and chemicals.

According to FICCI, some exporters are planning to cater to the domestic market for some time to prevent the downward trajectory of their profit margin.

The survey has also pointed out that the small and medium enterprises - have been affected most unlike the large establishments. The SMEs neither have the option of reducing their cost burden by resorting to external sources of finance like external commercial borrowings -, nor do they have the technical know-how of hedging their currency.

The exporters have also complained of facing severe competition from Chinese exporters as they enjoy subsidy by artificially pegging an exchange rate.

'The survey has clearly brought out that the recent appreciation of the rupee from a value of 44.28 to the dollar to 40.84 over a period of just 10 weeks has taken the exporting community by surprise,' FICCI said.

It further said that the exporters are apprehending that the rupee will continue to maintain its current level over the next few months, which would further decelerate the growth momentum.

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