Foreign buyers are smelling an opportunity in the rupee's slide. They have now started asking shippers to quote prices in rupee terms, putting the exporting community in a spot. Exporters are already faced with weak demand in developed markets such as the European Union and the US.
Buyers are asking for rupee quotes in sectors such as textiles, engineering, carpets and where Indian suppliers face the risk of being competitively edged out by other countries.
It is clear that buyers see the rupee depreciating further in the coming days. Hence their willingness to take the currency risk and benefit from the slide, according to Mr Rafeeque Ahmed, President of Federation of Indian Export Organisations (FIEO).
Mr Ahmed raised this issue at a meeting with heads of other export promotion councils in Goa on Saturday. He said that the current volatility of the rupee against the dollar is clearly not helping exporters.
No consensus yet
Exporters are discussing the latest demand of buyers and there is no consensus on how to respond to this situation. The current regulatory framework allows exporters to invoice their products in rupee terms, although this is not adopted in a big way.
If the exporting community were to agree to quote its prices in rupees and invoice more in the local currency, there is a good possibility of India's export realisations in dollar terms getting hit, sources said.
Exporters are still confident of meeting the export target of $350 billion this financial year despite the rupee slide. The local currency has depreciated by over 10 per cent since March beginning.
The buyers' preference for rupee quotes comes close on the heels of their demand for discounts, following the strengthening of the greenback against the local currency.
Exporters plan to approach the Reserve Bank of India (RBI) to review its recent directive requiring exporters to offload 50 per cent of their foreign currency holdings in the exchange earners' foreign currency account. Already, exporters have complied with it, bringing a gush of dollars into the market — a move that has not helped stabilise the rupee.
“We want RBI to lift the existing stipulation and go back to the previous regime,” sources in exporting community said.
The exporting community will also interact with the Commerce and Industry Minister, Mr Anand Sharma, on June 1 as part of the Board of Trade meeting.