Exporters in a tizzy as rupee hits 10-month high

Exporters are keeping their fingers crossed as the rupee strengthened to a 10-month high of 59.50 to a dollar on Monday, before closing at 60.05, threatening to make a big dent in their earnings.

Most exporters fear that a further rise in rupee value could affect their competitiveness in the global market, leading to a fall in volumes. They want the Reserve Bank of India to intervene by buying dollars.

Competitiveness hit “The dollar falling below ₹60 will certainly hit competitiveness of Indian products in a tough global market, especially since the Chinese have established a competitive edge by calibrating their currency to their advantage,” said Anupam Shah of the Engineering Exports Promotion Council.

Export rise Exports posted a growth of 5.26 per cent in April this year to $25.63 billion after two months of decline as demand in both the US and the European Union picked up. A rising rupee could neutralise the gains.

It is the rupee’s high volatility, not so much its strengthening, that is hurting exporters, says Tilakraj Manaktala, President, Delhi Exporters Association.

Volatility hurts “While exporters will suffer if the rupee becomes too strong, they also face pressure if it becomes very weak, as buyers start seeking discounts. It is in the interest of the nation if rupee fluctuation is in the range of 5-7 per cent,” Manaktala said.

“Exporters can manage if the rupee is between 60 and 62/dollar. The present situation is indeed a cause of concern for us. It would be difficult to cope if it increases further,” he added.

Seafood woes Seafood exporters also fear a drop in volumes this fiscal due to the strengthening rupee. With demand from the US, a primary buyer of shrimps from India, already low due to exceptionally harsh winters early this year, the rise in rupee value can make matters worse, officials from the Seafood Exporters Association of India said recently.

Both Manaktala and Shah feel it is time for RBI to intervene.

“While exports, especially of engineering goods, have done well in the first month of the fiscal, the RBI must ensure that the rupee does not become too strong by hot money pursuits in the stock market. This is the right time for RBI to buy dollars and build forex reserves," Shah said.