The country's exports are likely to be hurt by the credit rating agency Standard & Poor's downgrading of the US sovereign debt, according to the Federation of Indian Export Organisations (FIEO).
The weakening of the dollar resulting from the downgrade would make exports less competitive, though imports will turn cheaper and put further pressure on domestic manufacturers.
Stating this, Mr Ramu S. Deora, President of FIEO, said on Saturday that exports to the US will be hit because Washington is likely to raise taxes for reducing its deficits as part of the recent deal to increase the US's overall debt ceiling. The higher taxes will shrink disposable incomes of the American people and reduce demand for imports, thereby impacting exports, Mr Deora said in a statement.
The more immediate fear of exporters, however, is the possibility of the rupee appreciating against the dollar on account of the US sovereign debt downgrade.
“We are already facing the heat on this count here. Any further appreciation will blunt our competitive edge,” Mr Deora said, adding that this is “certainly not good for Indian exports.”
“Garments, handicrafts, leather, gems and jewellery would be the most affected export sectors, besides information technology.”
“The world's largest economy is entering depression while the Euro zone is in debt crisis. Thus our worst fear that exports in third and fourth quarters (of this fiscal) will be affected may come true.”
He demanded that the Centre immediately help the exports sector with an interest subsidy, reduction in transaction cost and upgrading infrastructure, particularly ports and roads.