India Inc hit hard due to appreciating rupee: Assocham
May 4, 2007 - 7:58:52 PM
New Delhi, May 4 - The appreciation of the Indian rupee in the past 12 months has adversely affected India Inc. as they have been burdened by higher interest rates, said a leading Indian industry report Friday.
Sectors affected the most are real estates, engineering, IT and financial services, as they have witnessed more than double increase in their interest rates, said the Associated Chambers of Commerce and Industry -.
Efforts by the Reserve Bank of India - to tame inflation have had serious effect on companies' profit margins. The corporates are unsure whether the RBI would take further stringent action by tightening the rupee.
'The corporate results are an indication towards the demand being impacted in the coming quarter and investment plans being hit leading to capacity constraints if the cost of money keeps its upward trend,' Venugopal Dhoot, president, ASSOCHAM said in a statement here.
'Clearly, the RBI's tight money stance has hit right at the profitability of the companies, adversely affecting the growth of real estate industry', he said.
The borrowing cost of the Indian IT firms has zoomed by 234 percent due to high interest rate regime. This has also led to the telecom, entertainment and infrastructure companies to reduce their borrowing cost.
'The telecommunication majors in India have resorted to paying back their debts resulting into lower interest costs,' the statement noted.
In the engineering sector, the interest rates have increased more than six times in the past 12 months.
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