Exporters can overcome exchange rate volatility by managing the uncertainty in cash flows by using available hedging instruments, according to G. Padmanabhan, Executive Director, Reserve Bank of India.
“Rupee volatility is something that we have to live with. Given the uncertainty in the global markets and turbulent domestic environment, foreign flows are not coming in,” Padmanabhan said.
The rupee started to gain in September after the Government announced a series of policy measures aimed at boosting investor sentiments.
The local unit appreciated as much as 300 paise in September. A weak rupee versus the dollar helps exporters to earn more on their exports.
Companies must factor in exchange rate fluctuations as a part of their risk management strategy or hedge their cash flows to the extent possible, he added.
Collaboration IS Key
TCA Ranganathan, CMD, Export-Import Bank of India, said that exporters should cut costs to minimise the impact of exchange rate volatility which is going to persist for a while.
“Companies can cut costs by collaborating with each other,,” he said.
Collaboration across common functions such as sourcing and marketing can help exporters cut cost, he added.
For importers, he said that there is an overwhelming desire to import instead of sourcing raw materials locally which can help bring down cost.